Savings for Indian refiners from Russian crude decline to a third

Indian refiners saved $8-10 billion from April 2022 to June 2024 - enough to cover half the fertiliser subsidy bill

Savings for Indian refiners from purchasing Russian oil have decreased to a third of what they were in the years following Russia’s invasion of Ukraine, which triggered global crises, sanctions, and discounted Russian oil seeking buyers. Despite this, savings from importing cheap Russian oil were significant enough to help Indian refiners tide over frozen petrol and diesel pump prices.

Resisting pressure from Washington and Brussels to adhere to Western sanctions paid off in the form of these savings, Indian officials said. India’s purchase of over 2 million barrels of Russian crude per day also contributed to capping oil prices.

India may have saved between $8 billion and $10 billion from April 2022 to June 2024, according to calculations by Business Standard based on industry and customs data. This amount could cover half the Rs 1.64 trillion (nearly $19.5 billion) fertiliser subsidy bill budgeted for this financial year or pay for the entire energy expenditure and petroleum subsidy. Additionally, the availability of Russian oil helped Indian refiners manage politically sensitive diesel and petrol pump prices, and contributed to the Rs 86,000 crore combined profits of state-run oil marketing companies last financial year, according to government data.

Savings on Russian oil can be calculated in two ways: Against the discounts offered and the volumes purchased, or by comparing it to the average price of Gulf and US oil that Indian refiners favoured before the Ukraine conflict. In the absence of discounted Russian crude, India might have reverted to Gulf and US oil.

India, the biggest buyer of seaborne Russian crude, might have saved around $4.8 billion and $4.9 billion in 2022-23 and 2023-24 from buying discounted Russian crude oil. But savings dropped to just $440 million in the first quarter of 2024-25 as Russia reduced discounts, and Iraq and Saudi Arabia offered better rates to Asian buyers, according to Business Standard calculations. Total savings in the past 27 months to June 2024 might have been around $10.1 billion.

Discounts on Russian oil fell from a high of $15.1 per barrel in January-March 2023 to $3.5-$4 per barrel in the April-June quarter of 2024-25, refining officials said.

The average discount for 2022-23 was $10.5 per barrel off dated Brent crude, an European benchmark, on a delivered basis to India, before declining to $6 per barrel in 2023-24 and $3.5 per barrel in the latest quarter. The availability and demand for Russian oil, along with reliable supplies, have led to reduced discounts, industry officials said.

India bought 373 million barrels of Russian oil in 2022-23, 608 million barrels in 2023-24, and 178 million barrels from April to June 2024. If savings from the discounts are calculated, they averaged $3.9 billion in 2022-23, $3.65 billion in the last financial year, and $623 million in the first quarter of 2024-25, totaling $8.1 billion.