By: Editorial |
Updated: June 21, 2022 9:11:56 am

With Russian traders offering discounts of 25-30 per cent for thermal coal and accepting payment in rupees, it isn't surprising that bulk purchases by Indian cement and steel companies have spiked in recent weeks.

India’s imports of Russian coal in June are reportedly expected to be the highest in at least seven and a half years. This comes alongside Russia displacing Saudi Arabia to become India’s second-largest oil supplier after Iraq in May. Neither of these are unwelcome developments, nor the fact that India has, for the first time, bought a large urea consignment from the US. With Russian traders offering discounts of 25-30 per cent for thermal coal and accepting payment in rupees, it isn’t surprising that bulk purchases by Indian cement and steel companies have spiked in recent weeks. The share of Russian crude processed in Reliance Industries’ Jamnagar refinery has, similarly, risen to 27 per cent in May, from less than 5 per cent before April. Why should any firm forgo the opportunity of sourcing oil at significant discounts to international prices? It has, likewise, become economical now to import urea from the US, which is quoting $55-75 per tonne cheaper than that from the Middle East, notwithstanding higher freight costs and longer voyage time.

But it is not just about profit calculations of companies. Diversifying supply sources and buying at the lowest price for equivalent quality is also in national interest. India’s imports of crude petroleum, coal and finished fertilisers were valued at $122.45 billion, $31.72 billion and $12.72 billion, respectively, in 2021-22, as against the previous fiscal’s corresponding levels of $59.48 billion, $16.27 billion and $6.83 billion. The country’s merchandise trade deficit hit a record $190.71 billion in 2021-22. A further widening of its deficits, whether external or fiscal, and uncontrolled weakening of the rupee, both external and internal purchasing value, is something it cannot afford. If importing more coal and oil from Russia or urea from the US forces existing suppliers — the likes of Australia, Indonesia, Saudi Arabia and United Arab Emirates — to lower prices, it would aid in macroeconomic stability necessary for long-term growth.

The growing trade with Russia may not be to the West’s liking. While the invasion of Ukraine deserves the widest condemnation, financial sanctions and not buying from Russia don’t really help. India and China purchasing more from Russia, if anything, reduces the pressure on the international oil market. Imagine where crude prices would have reached had these two Asian countries not stepped up buying from Russia. In fact, China and India are today the world’s top two net crude oil importers, with Russia emerging as the former’s No 1 and the latter’s No 2 supplier. The economic and national interests of others overriding its geopolitical priorities is a reality that the West has to acknowledge and accept, sooner than later.

This editorial first appeared in the print edition on June 21, 2022 under the title ‘What works best’.