New Delhi: The net cost of India’s oil imports has declined in the first seven months of 2007-08, thanks to an appreciating rupee as well as surging exports of petroleum oil and lubricants, or POL, products.
While the currency has reduced the rupee cost of imports, it has also inflated the export price of POL—partially offseting the impact of the rising import bill—prompted largely by the increase in international crude prices that have recently topped $100 (Rs4,050) per barrel.
Between April and October 2007, net POL import fell to Rs1.05 trillion from Rs1.08 trillion during the same period in 2006. Exports of petroleum, oil and lubricants have been rising steadily since 2006.
“There is an increasing trend of export of POL. This is helping bring down net-POL imports to a large extent,” said H.A.C. Prasad, senior economic adviser, ministry of finance.
Prasad has been closely associated with the drafting of the chapter on external sector in the Economic Survey 2007-08 which, for the first time, worked out net-POL imports.
POL continues to be the single major item of import with its share ruling over 30%.
Prasad also said rupee appreciation of nearly 12.8% between March 2006 and November 2007 has helped export of POL in particular, because of its high import intensity.
In dollar terms, the net-POL import growth decelerated to 19% in 2006-07, after peaking at 41.4% in 2005-06.
“In the first half of 2007-08 there was further moderation in the growth of net-POL imports to 11.4% (in dollar terms),” added Prasad. But, in rupee terms, the net-POL imports for 2005-06 grew by 39.3%, while in 2006-07 it slowed to 21%. For the April-September period in 2007, net oil imports actually declined by 0.82%.
In rupees, the share of petroleum crude and products in total exports has risen to 17.64% during April-October 2007-08, from 16.16% over the same period in 2006-07. Growth in exports as measured in rupees, in the same period rose 17.54% to Rs61,809 crore.
“India has excess refining capacity and our oil exports would go up by 2012. This would enhance India’s position as a global refining hub,” said Vijaya Katti, professor and chairperson, Indian Institute of Foreign Trade.
India will add 2.14 million barrels per day (bpd) to its existing 2.98 million bpd capacity by 2012.
Government-owned oil companies, such as Indian Oil Corp. Ltd and Oil and Natural Gas Corp. Ltd as also private players such as Reliance Industries Ltd, Essar Oil and Shell export refined products.
Ravi Mahajan, tax partner, oil and gas, Ernst and Young, said: “While refineries set up in Special Economic Zones (SEZs) will continue to benefit from exporting POL products because of tax benefits, refineries outside SEZs will be at a disadvantage because of withdrawal of tax holiday on them in the Budget.”
As a result, refineries set up after 1 April this year will not enjoy the tax holiday.
Utpal Bhaskar contributed to this story.