Achieving $900 billion export target by 2019-20 is essentially linked to the recovery of prices of petroleum products in the global market. The over 16 per cent contraction of India’s exports in the current fiscal year was aggravated by the collapse of petroleum exports, which declined 48 per cent between April 2015 and February 2016. The contraction of merchandise exports was much smaller, at 9 per cent. In 2013-14, petroleum exports earned the country $63.2 billion, when total merchandise exports was $314.4 billion. But the crash in prices means India will earn just a little over $30 billion from petroleum exports this fiscal year, the lowest since 2008-09.

Trade data published by the commerce ministry shows that petroleum product exports now account for less than 12 per cent of the country’s merchandise export earnings for the period April 2015 to February 2016 — a 10-year low. Since Reliance Industries’ Jamnagar refinery started operations at the end of 2008, the share of petroleum products had risen. It peaked at 20.5 per cent in 2012-13 helped by the elevated global prices and recovery from the 2008-09 economic and financial crisis.Earnings from export of petroleum products till February 2016 at $28.1 billion are about as much as what it fetched the country in the years 2007-08 and 2008-09. It may be recalled that petroleum crude prices had flared to a peak of $146 a barrel in July 2008 before the sub-prime crisis hit the US economy. India currently exports a lot more petroleum products than it did at the start of the Great Recession.

No doubt, the recovery of petroleum prices will help India’s export earnings. But it may not be happy news for the Centre or consumers. If global prices flare, domestic prices too will. To soften the pass-through of elevated prices, the finance ministry will be forced to cut excise duty on petrol and diesel, and that will hurt its revenue collection.

Tina Edwin Senior Deputy Editor

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