With Brent crude falling below $50 per barrel — it touched $49.93 in early trade on Wednesday, the lowest since July 2017 — India could draw some comfort as its extra fuel subsidy bill could prove to be lower than recent estimates and the current account deficit for FY19 could be a few billion dollars less than reckoned earlier.
Since the beginning of FY19, crude has been caught up in wider financial market weakness as higher US interest rates, the US-China trade dispute and the US shutdown unnerved investors and exacerbated worries over global growth. The price had touched a peak of $86.29 per barrel on October 3, prompting the Centre to cut excise duty by Rs 1.50 per litre. Public sector oil marketing companies also began absorbing Re 1 on each litre of petrol and diesel they sell. The steps brought relief to consumers.
“The significant moderation in oil prices observed lately may give a succour to the rising subsidy bill and the additional subsidy burden might be restricted to Rs 11,720 crore, taking the total petroleum subsidy to around Rs 36,353 crore against the budget estimate of Rs 24,932 crore,” SBI Research said in a report. —FE with Agency inputs