India’s Zero-Tax Policy on Foreign Crude Oil Suppliers: Boosting Trade, Securing Energy Needs

Key Takeaways

• Price Trends – Base Oil (N150) is at ₹67.5/L in Delhi and ₹61.25/L in Mundra. Fuel Oil (180cST Furnace Oil) is priced at ₹47.5/kg in Mumbai and ₹49/kg elsewhere.
• New Tax Policy – India’s Income Tax Bill, 2025, exempts foreign oil suppliers from taxation, encouraging more global producers to enter the Indian market.
• BPCL’s Brazil Deal – BPCL signed an annual crude purchase agreement with Petrobras for 6 million barrels in FY 2025-26, strengthening India’s diversification strategy.
• Trade Deficit Narrows – India’s merchandise trade deficit likely fell to $20.88 billion in January from $21.94 billion in December.
• Russian Oil Flow Adjustments – Asia’s Russian crude imports fell 7.4% in February, with India increasing purchases while China cut back.

Petroleum Prices: Base Oil at ₹67.5/L in Delhi, Fuel Oil at ₹49/kg in Mumbai

• In Delhi, Base Oil (N150) is priced at ₹67.5 per liter, while in Mundra, it stands at ₹61.25 per liter. 
• Fuel Oil (Virgin 180cST Furnace Oil) in Mumbai is available at ₹47.5 per kg, whereas Fuel Oil (180cST Furnace Oil) is priced slightly higher at ₹49 per kg. 
• Lubriedge Rubber Process Oil (Paraffinic 245) in Delhi is currently at ₹72 per liter, while Iranol Rubber Process Oil (Aromatic - Bulk) in Mumbai is priced at ₹44.5 per kg.

India’s Tax Exemption to Reshape Crude Oil Imports

• India is one of the world’s largest importers of crude oil, heavily dependent on foreign suppliers to meet its growing energy needs. With domestic production covering only a fraction of demand, the country has been actively seeking ways to ensure a steady supply of crude oil at competitive prices. 
• The Income Tax Bill, 2025, which exempts foreign companies from taxation when selling crude oil to India, is expected to have a significant impact on this dynamic.
• This exemption will likely encourage more international oil producers to enter the Indian market, fostering competition and enhancing supply security. 
• By removing tax barriers, India is making itself a more attractive destination for long-term supply contracts, reducing risks of supply disruptions. Additionally, foreign companies that store crude oil in India under government-approved agreements can also benefit from the exemption, further strengthening the country’s strategic reserves.
• The demand for crude oil in India is expected to rise in the coming years, driven by industrial growth, increasing energy consumption, and expanding refining capacity.
• However, geopolitical factors, price volatility, and OPEC+ production decisions will continue to influence supply. By offering a tax-free environment for foreign suppliers, India is positioning itself as a crucial hub in global energy trade, securing stable inflows even in uncertain market conditions.

BPCL Secures Crude Supply from Brazil – India Expands Energy Partnerships

• The Income Tax Bill, 2025, provides a zero-tax benefit to foreign companies selling crude oil and other goods to Indian entities, provided they do not engage in any other commercial activities in India. 
• This move aims to enhance trade partnerships, encourage foreign investments in energy infrastructure, and promote long-term supply agreements. The exemption also extends to foreign firms storing crude oil in India for future sales, supporting strategic reserves and ensuring energy security.
• India's trade deficit likely to narrow to USD 20.88 bn in Jan from USD 21.94 bn in Dec: Union Bank of India. India's merchandise trade deficit is expected to have narrowed to USD 20.88 billion in January 2025, down from USD 21.94 billion in December 2024, according to a report by Union Bank of India.
• Bharat Petroleum Corporation Ltd (BPCL) has signed an annual crude purchase agreement with Brazil's national oil company Petrobras.
• The contract is valid for one year with an option to extend by another year, BPCL said in a statement on Wednesday. The state-run company didn't give more details on volume or whether it's a firm contract or optional.
• Asia's crude oil markets are adjusting rapidly to new sanctions against top supplier Russia, sucking up cargoes while they can and moving to alternatives for deliveries in coming months.
• The top-oil importing continent, Asia is on track to receive about 3.23 million barrels per day (bpd) of Russian crude in February, according to data compiled by LSEG Oil Research.
• This is down about 7.4% from January's 3.49 million bpd, but the breakdown of destinations shows India buying more and China less.
• State-run Bharat Petroleum Corporation Ltd. (BPCL) has signed a strategic term contract with Petrobras, Brazil’s national oil company, for optional crude imports of 6 million barrels in the 2025-26 financial year, Chairman G. Krishnakumar announced on Wednesday (February 12) at the India Energy Week conference.
• This significant development marks a major milestone in the ongoing efforts to diversify India's crude oil sources and strengthen energy cooperation with Brazil, BPCL said.

Expert Opinion: India’s Tax-Free Oil Imports to Boost Competition

• Industry experts view this policy as a positive step toward attracting global suppliers while securing stable crude oil inflows. By removing tax barriers, India enhances its competitiveness in the global market and reduces reliance on intermediaries.
• However, strict compliance with government-approved agreements will be necessary to maintain tax benefits, ensuring transparency and fair trade practices. This move is expected to reshape India's oil import landscape, benefiting both domestic refiners and foreign exporters.