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India's energy import bill has come under pressure as the landed cost of crude oil has risen to USD 130-140 per barrel, significantly above December Brent futures trading at around USD 106, while persistent fuel and food inflation could prompt the Reserve Bank of India (RBI) to raise interest rates by at least another 50 basis points this fiscal year, Anindya Banerjee, Head of Commodities Research at Kotak Neo, said.
Speaking exclusively to ANI, Banerjee said higher freight, insurance and handling costs, along with spot delivery premiums, have substantially increased the cost of importing crude oil, adding to the pressure on India's energy bill. "Before the war, nobody really bothered about freight or other charges per barrel because insurance was very low per barrel. But now it matters," he said, highlighting the growing significance of additional costs in determining the final price of imported crude. Banerjee attributed the increase in costs to disruptions in energy markets amid the conflict in West Asia, noting that freight, insurance and handling expenses have roughly doubled for oil sourced outside the Gulf. On the inflation outlook, Banerjee said that although core inflation remains benign, sustained increases in fuel and food prices are likely to spill over into other segments of the economy. He projected headline consumer inflation, currently around 5.4 per cent, to rise above 6 per cent by December, potentially prompting further monetary tightening by the RBI. Despite the inflationary pressures, Banerjee said the government's fiscal position remains comfortable, with the fiscal deficit at a manageable level. On the Indian rupee, which has fluctuated between 94 and 97 against the US dollar, he said the RBI's measures to curb speculative hedging and encourage capital inflows have helped limit depreciation, keeping the currency's weakness near the 96.5-97 range. However, he cautioned that a sustained recovery in the rupee beyond the 94-per-dollar level would depend on a moderation in international oil prices, global yields and the US dollar. Banerjee also warned that an escalation of the conflict in West Asia and threats to energy infrastructure could pose significant risks to global economic growth. He said that if oil supply flows fail to normalise by the middle of next year, Brent crude futures could rise above USD 120 per barrel, potentially weakening demand and increasing the risk of a global recession. "This is the most artificial bull run in energy in over two decades... it is purely about choking supply," Banerjee said, stressing that restoring oil flows would be crucial to containing further economic fallout. He added that sustained supply disruptions could intensify inflationary pressures, complicate monetary policy decisions and weigh on global economic activity. (ANI)
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