India consumed 194.30 million tonnes (MT) of petroleum products in FY21, registering a Y-o-Y decline of 9.3 per cent from 214.13 MT in FY20, which can be largely attributed to the Covid pandemic and the ensuing disruptions, said the Economic Survey 2021-22 on Monday. Despite this, among the major import commodities, crude petroleum imports more than doubled to $73.3 billion in April-November, 2021, compared to last year, and continues to be the highest imported commodity, said the Survey. Crude oil processed during FY21 stood at 221.77 MT against 254.39 MT in FY20, showing an achievement of 88.1 per cent of the target of 251.66 MT for FY21. The shortfall in crude oil processing was mainly due to lower demand of petroleum products due to Covid during 2020-21, it said. The production of petroleum products in the country stood at 233.51 MT in FY21, showing an achievement of 90.2 per cent of the target of 259.02 MT for the same fiscal year. On the other hand, natural gas production in FY21 stood at 28.67 billion cubic meters (BCM) against production of 31.18 BCM in FY20 and 85.4 per cent against the target of 33.57 BCM for FY21. The reasons for lower domestic oil and gas production in 2020-21 include, inter-alia, declining production from old and marginal fields, unplanned shutdown, and operational losses from few producing wells, it added. The current financial year also witnessed high prices of crude in the international market, which fuelled inflation. The Economic Survey said that wholesale inflation based on Wholesale Price Index (WPI) rose to 12.5 per cent during 2021-22 (April to December). This has been attributed to low base in the previous year, pick up in economic activity, sharp increase in international prices of crude oil and other imported inputs, and high freight costs. “In 2021-22 (April-December), inflation in ‘fuel and light’ and ‘transport and communication’ was mostly driven by high international crude oil, petroleum product prices, and higher taxes. In April 2020, in response to subdued global demand because of COVID-19 induced restrictions, the price of Indian basket of crude oil dipped to $19.9/bbl. However, thereafter, the prices have been on an uptrend,” said the Survey. The upward trend was on account of unprecedented cuts in crude oil supply by OPEC and other oil producing countries. The upward trend continued in 2021 as well, as demand picked up with easing of Covid restriction in most regions of the world. Besides, the unwinding of production cuts made last year by OPEC countries has been gradual and has not kept pace with the recovery in demand. However, since the second half of October 2021, crude oil prices had softened, due to factors that include rising Covid cases in Europe, and possibility of release of crude oil from strategic reserves by the US and other countries. Retail selling price (RSP) of petrol and diesel in the country are linked to the prices of crude. The Indian basket is moving upwards and reached beyond $84 per barrel in October, 2021. The Dollar exchange rate was also on the upward trend and is hovering around Rs 75 per USD which was also impacting the prices of Petrol and Diesel. In this background, excise duty on petrol and diesel was rationalised by ₹5 per litre on petrol and ₹10 per litre on diesel. After this move, many states and Union Territories have also reduced VAT on Petrol and Diesel to give relief to the consumers. The cut in central excise duty on petrol and diesel followed by reduction in VAT led to moderation of retail selling price of petrol and diesel in India in 2021. However, crude oil price again witnessed an uptick in January 2022 with tight supply amid concerns about rising geopolitical uncertainties in Eastern Europe and the Middle East.

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