PM calls for cutting oil import bill by $25 bn
After placing restrictions on gold imports, Prime Minister Manmohan Singh earlier this week asked petroleum minister M Veerappa Moily to curb oil imports, the largest contributor to India's import bill, to reduce the dollar demand and shore up the rupee.
Sources said the PM has set a figure of $25 billion to be shaved off from the oil import bill. The cutback, he is learnt to have told Moily, was essential considering crude oil price had climbed to above $100 dollar-a-barrel mark in this month.
Crude is now hovering at $105.61 a barrel after softening in May and then breaching the $100-mark on June 28.
India imported $156.97 billion worth crude oil and products in 2012-13 but ended up with a net import bill of $98.14 billion thanks to product exports of $58.84 billion.
Oil imports account for 34 per cent of the total import bill and a dollar increase per barrel raises trade deficit by $900 million.
Among the measures informally conveyed by the petroleum ministry to state-run refiners are reduction in crude oil inventories from the current 30-day level, mandatory blending of 5 per cent ethanol in petrol and trimming of refinery throughput, said sources.
Retail pricing of petrol and diesel would also be raised to curb the extravagant consumption and diversion, especially of diesel, in industrial sector.
Trade deficit, the largest chunk of the current account deficit, has put pressure on the rupee which fell today to 61.20 a dollar, near the all-time low of 61.21 recorded on July 8.
It regained later to close at 60.40 on government's announcement on steps to boost exports and attract more foreign capital.
Coupled with a shortage of investment cash, India's spending on oil and gold are starting to affect its economic welfare and as the rupee falls to record lows, India's deficit came under extra pressure as the cost of its oil imports go up.