India, the world’s third-largest oil importer, is poised to save up to Rs 1.8 lakh crore on its crude oil and liquefied natural gas (LNG) import bill if the current trend of declining global energy prices persists, according to rating agency Icra.In the fiscal year ending March 31, 2025, India spent $242.4 billion on crude oil imports, covering over 85% of its domestic needs. Additionally, the country spent $15.2 billion on LNG imports. However, recent softening in international oil prices has led to significant savings.Earlier this week, oil prices fell to a four-year low of $60.23 per barrel due to concerns over rising global supply amid uncertain demand. While prices have since rebounded to $62.4 per barrel, they remain approximately $20 lower than in March 2024, when petrol and diesel prices were reduced by Rs 2 per litre ahead of general elections.ICRA projects that average crude oil prices for the fiscal year 2026 (April 2025 to March 2026) will remain in the $60–70 per barrel range. At these levels, the country could save Rs 1.8 lakh crore on crude oil imports and an additional Rs 6,000 crore on LNG imports.For upstream oil companies, this price range is expected to result in a Rs 25,000 crore reduction in profits before tax for FY2026. Despite this, ICRA anticipates that capital expenditure plans for domestic upstream players will remain unaffected.Oil marketing companies (OMCs) are expected to maintain healthy marketing margins on auto fuels, while under-recoveries on liquefied petroleum gas (LPG) are likely to decrease. The government controls LPG prices, and OMCs sell the fuel below cost, compensating for the under-recovery through subsidies. Lower LPG under-recovery and government compensation are expected to support the profitability of downstream companies, even amid increased excise duties on auto fuels implemented in April 2025.Icra also notes that the decline in crude oil prices will lead to a moderation in gas prices, translating to significant savings on term LNG imports. If crude oil prices sustain between $60–70 per barrel, ICRA projects savings of Rs 6,000 crore on LNG imports from Qatar in FY2026 compared to FY2025.While the reduction in crude oil prices presents economic benefits, refiners may face inventory losses due to the sharp decline in prices. Additionally, further hikes in excise duties cannot be ruled out.The softening of global oil prices is expected to provide significant economic relief to India, reducing its import bill and supporting fiscal stability.
