India is unable to locate a customer willing to pay for its purchases of crude oil in rupees

 India is unable to locate a customer willing to pay for its purchases of crude oil in rupees

India is unable to locate a customer willing to pay for its purchases of crude oil in rupees

Oil exporters still avoid dealing with the rupee, despite modest success in non-oil commerce with a few nations.

   India bought 152.6 million tons of crude oil worth $113.4 billion between April and November of the current fiscal year.

The oil ministry said a parliamentary standing committee that suppliers have voiced worries about high transaction costs and financial repatriation, which has prevented India from finding takers for its attempt to utilize the rupee to pay for petroleum imports.

The US dollar is the default payment currency for all transactions involving the import of crude oil, in accordance with international trade practices. On July 11, 2022, the Reserve Bank of India did, however, let importers and exporters to make payments in rupees in order to internationalize the Indian currency.

Oil exporters still avoid dealing with the rupee, despite modest success in non-oil commerce with a few nations.

"No crude oil imports by oil PSUs were paid in Indian Rupees during the fiscal year 2022–2023. According to news agency PTI, the Oil Ministry informed the Parliamentary Department Related Standing Committee that "crude oil suppliers (including the UAE's ADNOC) are still voicing their concerns over the repatriation of funds into the preferred currency and demonstrate the risks of exchange alterations as well as the high transaction costs brought about by the conversion of funds."

The ministry said that Indian Oil Corporation (IOC) has notified it that it has suffered greater transaction costs since crude oil suppliers are making more transactions. This information is included in the committee's report, which was presented in Parliament last week. It is reimbursed to the IOC.

According to the statement, the RBI granted authorization to establish Rupee Vostro accounts in the partner trading nation last year.

This process requires Indian importers to pay for their products in Indian Rupees, which are then credited to the partner country's special Vostro account of the correspondent bank in relation to the invoice for the delivery of goods or services from the foreign seller. Provider.

"Payment for crude oil can be developed in Indian rupees, provided the suppliers comply with the laws in this regard," stated the ministry. "At present, Reliance Industries Limited as well as oil PSUs do not have any agreement with a particular crude oil supplier to purchase crude oil in Indian currency."

India is the third-largest energy user in the world. Less than 15% of the nation's requirements are met by indigenous production; the remaining crude is imported and refined into fuels like gasoline and diesel.

During the fiscal year 2022–2023 (April 2022–March 2023), India imported 232.7 million tons of crude oil at a cost of US$157.5 billion. Its main suppliers were the United Arab Emirates, Saudi Arabia, Iraq, and Russia. Of this, 58 percent, or 141.2 million tons, were supplied from the Middle East.

India bought 152.6 million tons of crude oil worth $113.4 billion between April and November of the current fiscal year.

India will need between 5.5 and 5.6 million barrels daily. About 4.6 million barrels are imported daily out of that, accounting for about 10% of global oil commerce, the ministry informed the committee.

Regarding price swings, the ministry said that PSU oil businesses are impacted by changes in the price of crude oil, but only to the degree of fuel and financial losses.

"Prices of refined petroleum products and crude oil often fluctuate in tandem with one another. Refiners are thus most affected by product crack volatility, or the price differential between product pricing and benchmark crude oil, according to the ministry's further statement.

Oil firms are hedging certain product cracks when possibilities present themselves in the futures market as a way to protect themselves from this volatility. Every hedge position is executed via the OTC (over the counter) market with registered foreign counterparties, and the Authorized Dealer Bank receives a quarterly report with all hedge data. In accordance with their risk management procedures, oil corporations are also hedging their foreign currency exposure.