New Delhi: In the wake of the US not renewing any waivers granted last year to buyers of Iranian oil, India, the second biggest importer, may find consumers bearing the brunt of it.
The US sanction against India’s oil imports from Iran will not disrupt domestic fuel supply as Indian refiners have made alternative arrangements, but consumers may feel the pinch as oil marketing companies are under immense pressure to hike petrol and diesel rates post-elections.
Crude oil imports are becoming costlier due to rising prices added with the pressure of non-availability of Iranian oil.
Sources in state-run refineries informed, "Oil companies are unable to proportionately increase retail prices of petrol and diesel due to political constraints. Ultimately, the consumer will face the heat as oil companies cannot absorb it [higher crude oil rates] indefinitely.”
Benchmark Brent crude prices on Tuesday surged to USD 74.70 per barrel, the highest since November 2018, mainly due to the US decision to withdraw waivers to all countries, including India, from importing Iranian crude oil from May 2.
Petroleum and natural gas minister Dharmendra Pradhan said India will get additional supplies from other major oil producing countries to compensate for the loss of Iranian oil.
“The government has put in place a robust plan for an adequate supply of crude oil to Indian refineries. There will be additional supplies from other major oil-producing countries; Indian refineries are fully prepared to meet the national demand for petrol, diesel & other petroleum products,” he tweeted.
The decision is less surprising when taken into account the Trump administration’s pullout of the Obama-era Iran nuclear deal last year. Trump vowed to put sanctions on Iran days after he withdrew from the deal. The US demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which had allowed Iran's eight biggest buyers, most of them in Asia, to continue to import limited volumes.
India imported about 5 per cent more oil from Iran in the last fiscal year through March as companies raised purchases ahead of US sanctions against Tehran from November, preliminary tanker arrival data obtained from shipping and industry sources showed.
Despite Washington restricting India's purchases from Tehran, refiners shipped in about 479,500 barrels per day (bpd) of Iranian oil in 2018/19 compared with about 458,000 bpd a year before.
The United States introduced sanctions in November but gave a six-month waiver to eight nations, including India, which allowed them to import some Iranian oil. India was allowed by Washington to continue to buy about 300,000 bpd oil until early May.
In March India's oil imports from Iran rose to about 405,000 bpd, about 56 percent higher than February, the data showed. March volumes were however about 6 per cent lower than the purchase in the same month a year earlier.
A lack of ships delayed the lifting of some cargoes to end-February, leading to higher arrivals in March, sources said. BPCL could not lift cargo from Iran as a tanker was not available, a company source said.
Since November, when India received the sanctions waiver, only state-run Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum and Mangalore Refinery and Petrochemicals have been buying Iranian oil.
India's overall imports from Iran in 2018/19 were lower than the 500,000 bpd that Iran was hoping to sell to its second-biggest oil client after China. Indian refiners raised purchases from Iran in April-October 2018, drawn to almost free shipping and extended credit offered by Tehran to boost sales.
In the first quarter of 2019, India shipped in about 40 per cent less oil from Iran at about 313,400 bpd.
Refiners placed orders to buy 8 million barrels in April but India would receive higher volumes as some delayed cargoes of March arrive at Indian ports this month BPCL
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