Prolonged Iraq crisis may hit India hard

Although the Iraq crisis hasn’t so far caused any disruption in the country’s crude supplies, New Delhi is watching the developments in the strife-torn country, given its potential to push up global crude prices.About 13 per cent of India’s crude oil imports in FY14 were from Iraq, the most after Saudi Arabia, which accounted for a fifth of the country’s oil imports of 190 million tonnes in the year. Analysts said oil prices would move dramatically if militants make inroads into southern Iraq, which makes up for roughly three-quarters of the country's crude output. The country’s exports of 2.58 million barrels a day in May were all from the southern region only.India maintains a stock of crude oil ranging from 15 to 30 days. Shortfall from Iraq supplies to be substituted from other suppliers including Saudi and Kuwait, but if disruptions continue for a longer time, Indian refiners are worst hit.A rise in the price of crude oil directly affects India's fuel subsidy and could potentially strain government finances. The losses on diesel have now come down to Rs 1.62 per litre and the government is targeting to make the fuel's price totally market-determined. For each dollar increase in international crude price could raise the price of diesel by about 40 paise a litre.