The broad contours of the deal indicate that Russia will take care of shipping and insurance for crude oil supplies to India. This will remove a major hurdle for Indian refiners in buying Russian crude.
If the deal goes through, it would indicate that India is keeping its doors open to trade with Russia, an old ally. The discount on Russian crude would also help reduce costs for India, although the amount currently being discussed is not huge.
The quantity, which is close to India’s consumption of 4.5 million barrels a day, will be delivered in a few months, the sources said, without identifying the type of crude oil or ports of loading.
On Monday, Oil Minister Hardeep Puri told the Rajya Sabha that India was considering the Russian offer of subsidized oil made by his counterpart last week.
However, the payment mechanism is not clear at the moment as the government is yet to act on it. It is considering a Rupee-Ruble arrangement and is routed through Indian banks that do not have business in the West and Russian banks with branches in India. A final decision on the issue is expected to be on the table in the next few days along with other options, sources told TOI.
India is dependent on imports to meet 85% of its oil requirement. At 3.6 million tonnes, Russian crude accounted for 2% of the 176 million tonnes imported by India between April 2021 and January 2022.
This is due to the difficulty in shipping. Urals and Sokol are the two main crudes exported by Russia. The Urals are shipped from the Black Sea port of Novorossiysk. It is a long and winding route that involves multiple trans-shipments, making shipping costs prohibitive. Ukraine conflict Insurance and war risk premiums have increased.