While crude oil prices fluctuate across the globe, oil procured under the Indian basket frequently commands a higher price tag compared to standard international benchmarks. On the evening of October 24, Brent crude traded at 116 dollars per barrel in the global market, whereas the average price of the Indian basket hovered at 121 dollars per barrel through October. This recurring gap raises a fundamental question about whether Indian basket crude outperforms other global benchmarks or if specific economic factors drive up its cost.
Understanding the Indian Basket and Its Quality
It is important to note that the Indian basket is not a distinct physical grade of oil, but rather a benchmark representing the average price of crude oil imported by India. The oil constituting the Indian basket generally belongs to a superior grade. It contains notably less sulfur compared to various other crude varieties available globally, making its overall quality quite high. Because of its lower sulfur content, refiners find it cleaner and more efficient to process.
Composition of Grades in the Indian Basket
The Indian basket primarily comprises Brent crude, which is recognized as one of the most expensive oil types available. During October, imports consisted of 65.27 percent Brent crude, while the Oman-Dubai grade accounted for the remaining 34.73 percent. Oman-Dubai crude serves as a major pricing standard across Asian markets, carrying a lower price point and higher sulfur levels than Brent. The exact proportion between Brent and the Oman-Dubai grade shifts periodically depending on procurement patterns.
Key Drivers Behind the High Price of the Indian Basket
Several distinct factors explain why the Indian basket remains expensive. The primary driver is the heavy weightage of Brent crude within the mix, which naturally elevates the overall average price whenever its share increases. Furthermore, geopolitical tensions in West Asia, disruptions along maritime transport routes, and rising marine insurance freight expenses push international acquisition costs higher.
India does not rely solely on Brent and Oman-Dubai benchmarks; it also purchases discounted crude from nations like Russia. However, the expensive freight charges associated with long-distance shipping ultimately drive up the blended cost of the Indian basket. Additionally, foreign exchange fluctuations between the US dollar and the Indian rupee play a major role. Whenever the rupee weakens against the dollar, the domestic import basket becomes more expensive. Because Brent crude is a lighter oil that yields greater volumes of petrol and diesel during refining, its price surges more aggressively during periods of overall market inflation.
