India Poised to Reduce Oil Import Costs by Rs 1.8 Lakh Crore

India, the world’s third-largest oil importer, stands to benefit significantly from a decline in global energy prices, potentially saving up to Rs 1.8 lakh crore on its crude oil and liquefied natural gas (LNG) import bills. According to the rating agency Icra, this financial relief could materialize if the current trend of decreasing prices continues. In the fiscal year ending March 31, 2025, India spent a staggering $242.4 billion on crude oil, which accounted for over 85% of its domestic consumption, alongside an additional $15.2 billion on LNG imports. Recent fluctuations in oil prices have created a favorable scenario for the country’s economy.

Current Trends in Oil Prices

Earlier this week, oil prices dropped to a four-year low of $60.23 per barrel, driven by concerns over increasing global supply amid uncertain demand. Although prices have since rebounded to $62.4 per barrel, they remain approximately $20 lower than the levels seen in March 2024. This decline in prices has already prompted reductions in petrol and diesel costs by Rs 2 per litre in anticipation of the general elections. ICRA forecasts that average crude oil prices for the fiscal year 2026, spanning from April 2025 to March 2026, will likely stabilize in the $60–70 per barrel range. If this projection holds true, India could realize substantial savings on its import bills.

Impact on Domestic Oil Companies

The anticipated price range is expected to lead to a Rs 25,000 crore decrease in profits before tax for upstream oil companies in FY2026. Despite this reduction, ICRA believes that capital expenditure plans for domestic upstream players will remain intact. Oil marketing companies (OMCs) are expected to maintain healthy marketing margins on auto fuels, while the financial burden of under-recoveries on liquefied petroleum gas (LPG) is likely to diminish. The government regulates LPG prices, and OMCs often sell this fuel below cost, compensating for losses through subsidies. The expected decrease in LPG under-recovery, coupled with government support, should bolster the profitability of downstream companies, even in light of increased excise duties on auto fuels introduced in April 2025.

Projected Savings on LNG Imports

ICRA also highlights that the decline in crude oil prices will likely lead to a moderation in gas prices, resulting in significant savings on term LNG imports. If crude oil prices remain between $60 and $70 per barrel, ICRA estimates that India could save Rs 6,000 crore on LNG imports from Qatar in FY2026 compared to FY2025. This financial relief is crucial for the country, as it navigates the complexities of its energy needs while striving for fiscal stability.

Challenges Ahead for Refiners

While the drop in crude oil prices offers economic advantages, refiners may encounter challenges, including potential inventory losses due to the rapid decline in prices. Additionally, the possibility of further hikes in excise duties cannot be dismissed. Nevertheless, the overall softening of global oil prices is expected to provide significant economic relief to India, reducing its import bill and enhancing fiscal stability in the long run. As the country continues to adapt to these changes, the focus remains on leveraging these savings for broader economic benefits.

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