New Delhi: India's petroleum exports saw a steep decline during the first five months of fiscal year 2025 due to lower demand from key markets and disruptions along the supply route, especially in the Red Sea region.
In value terms, petroleum exports during April-August stood at $31.84 billion, down from $35.30 billion in the same period of the previous year, according to data from the ministry of commerce and industries.
During August, India's petroleum exports registered their steepest monthly fall. In value terms, petroleum exports during August 2024 stood at $5.96 billion, down 37.56% from $9.54 billion reported during August 2023.
As a result of a sharp dip in petroleum exports and a rise in gold imports, India's goods trade deficit widened to a 10-month high in August at $29.65 billion.
Interestingly, while petroleum exports rose during April and May, they have fallen steeply every month since then.
India's petroleum exports reported an 18.3% and 22.5% annual drop in value terms, during June and July, respectively.
"The drop in India's petroleum exports in the last three months (June-August 2024) was mostly due to the Red Sea issue, which led to higher shipping costs and time taken for these exports to reach their required destinations," said Ajay Srivastava, former trade service official and the founder of economic thinktank Global Trade Research Initiative (GTRI).
"This made the low-value and high-volume exports less competitive," he added.
The Red Sea crisis, which began in October 2023, with Iran-backed Houthi rebels disrupting trade in the area, has intensified in recent months.
As a result, container ships carrying commodities are rerouting around the Cape of Good Hope instead of using the Suez Canal, leading to an increase in the cost and time for Indian exporters.
The Red Sea crisis has affected India's overall merchandise trade, which includes exports like petroleum products, textiles, chemicals, auto parts, iron and steel, and rice, among others, which are largely transported through the area.
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Meanwhile, lower demand for petroleum products in India's key markets like Europe has also contributed to a fall in petroleum exports.
However, experts expect the trend to continue.
"Some refinery capacities have come up globally. So, supply seems to be higher than the demand. Also, the demand may have weakened of late due to several factors. The penetration of EVs (electronic vehicles) in Europe has increased which may have somewhat hit fuel demand," said Prashant Vasisht, senior vice president and co-group head of corporate ratings, Icra.
"Going ahead, with expectations of a warm winter in Europe, the tepid demand scenario may continue. Further, because of geopolitical tensions and trade disruptions shipping costs soar so alternate sources may become more economical vis-a-vis India," Vasisht added.
Crude oil prices have fallen by about 16.71% since 1 April. The price of Brent crude stood at $74.90 a barrel on Tuesday, down 18.40% over the year.
A ministry of commerce and industries spokesperson didn't respond to emailed queries.
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