A weak rupee may jack up import bills

A weakening Indian rupee is expected to increase import costs, particularly for oil and gas, but the impact may be offset by declining oil prices. The impact on other imports, such as coal, smartphones, edible oils, pulses, and fertilizers, varies depending on factors like trade terms, margins, and domestic production.

"THE COST OF imports of oil & gas will increase with a weakening rupee. However, with the decline in oil prices to $70-75 per barrel now, the impact of weakening rupee would be offset," said Girishkumar Kadam, senior vice-president & group head - corporate ratings, at Icra. He added that the oil import bill is likely to be lower in FY25 against FY24 in rupee terms.

India's net oil and gas import bill stood at $89 billion in April-November of FY25, against $79.6 billion a year ago. In FY24, the net oil and gas imports had touched $121.9 billion.

Moreover, the weakening of the rupee should have a limited impact on the country's negotiations and pricing with oil-exporting countries as most of the trade happens in dollar terms, analysts say. Icra expects the dollar-rupee pair to trade between 85 and 86 in the near term. The country is also a major importer of coal, given the need to run thermal power plants at plant load factors. There are units run specifically on imported coal. It is estimated that for every ₹1 change in the exchange rate, the cost of generation for imported coal-based power projects is expected to vary by 4 paise per unit.