A potential 50% reduction in Indian imports of Russian crude could increase oil bills by up to $10 billion annually, risking inflation and external account strain amid ongoing diversification in supplies and geopolitical tensions.
India could face a heavier oil import burden if it sharply cuts back on Russian crude, with economist and former UN adviser Santosh Mehrotra saying a 50% reduction in purchases could add $5 billion to $10 billion a year to the bill. In an interview with ANI, Mehrotra argued that discounted Russian barrels have helped cap India’s energy costs and warned that a large reduction would ripple through inflation, the rupee and the current account deficit.
His remarks come as Indian refiners continue to lean on Russian crude, even as they also look to diversify supplies. The Financial Express recently reported that the delivered premium on Russian oil has fallen to about $5 to $6 a barrel from roughly $10 to $12, making it more attractive for buyers in a volatile market shaped by tensions in the Middle East, including risks around the Strait of Hormuz.
The scale of the exposure has also been highlighted by other analysts. A State Bank of India report, as summarised by LiveMint, said India’s crude import bill could rise by as much as $12 billion in fiscal 2027 if Russian oil imports stopped altogether. Business Standard has also reported that while Indian refiners could technically run without Russian supplies, they would face trade-offs in yields and product quality, including less diesel and jet fuel output and more residue.
Mehrotra said the broader economic effect would depend not only on replacement costs but also on whether the government allowed fuel prices to rise. He estimated inflation could increase by about 0.3 percentage point if Russian purchases were cut by half, and said higher import costs could put pressure on India’s external accounts. That warning comes as India and the US continue trade talks, with some reports noting Washington’s threat of higher tariffs on major buyers of Russian energy, although Mehrotra said such measures have not yet been implemented and could still include exemptions.
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