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Ban on Iranian crude may cost Indian refiners INR 2,500 crore - ICRA

Gasoil News - Published on Thu, 25 Apr 2019

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Credit rating agency ICRA said in a report that discontinuation of Iranian crude oil imports might negatively affect the annual operating profits of Indian refiners by over INR 2,500 crore. Mr Abhishek Dafria, vice-president and co-head at ICRA said that “Indian refineries benefit from the higher credit period of 60 days offered on Iranian oil compared to 30-day credit period typically offered by other suppliers. As per our estimates, the annual operating profits of the domestic refining industry could be negatively impacted by as much as INR 2,500 crore due to the discontinuation of Iranian oil imports.”

India had been one of the eight countries that had earlier received a waiver for a six-month period to continue to import Iranian oil, albeit in lesser quantities. With the six-month period ending on 2 May 2019, US officials yesterday made public statements clarifying that no country would be exempt from the subsequent ban and no extensions on the waivers will be given.

An executive at a leading oil marketing company (OMC) told ETEnergyWorld, “The company had prepared for such an eventuality and we have made elaborate alternative arrangements if Iranian crude goes out of the market completely. However, if Iranian crude goes out completely from the market then it will be a tough call not just for India but globally. We now expect global crude prices to come under pressure because of this.”

The executive said that continuation of payments using rupee will not be feasible for the company and the banking institution involved.

The oil ministry said in a statement that “The Government of India has put in place a robust plan to ensure that there is adequate supply of crude oil to Indian oil refineries from May 2019 onwards. There will be additional supplies from other major oil producing countries from different parts of the world.”

India is expected to negotiate with its US counterparts on extending the waiver given that India currently meets more than 10 per cent of its oil requirements from Iran. In FY19, India imported 24 million million tonne of crude from Iran, which made it the third-biggest supplier of crude for India.

Mr K Ravichandran, senior vice-president and group head at ICRA said that “We are already seeing the rupee depreciate due to the rising current account deficit since every USD 10 per bbl increase in crude oil prices increases the current account deficit by about 0.4 per cent of the gross domestic product. The increase in inflationary pressures would become evident as we expect that India’s inflation would increase by 10 bps for every USD 10 per bbl increase in crude prices.”

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Posted By : Sanju Moirangthem on Thu, 25 Apr 2019
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