Dubai, Nov 17 (IANS) With crude oil dropping below $40 a barrel, Finance Minister Arun Jaitley has said low oil prices have created a favourable environment for the Indian economy as it helped to absorb the loss faced by state-run marketters and kept inflation under control.
“It has enabled us to absorb the loss that our own oil companies were facing because of future purchases. It has also kept inflation under control, which, in turn, has helped the Reserve Bank to ease up the rates,” Jaitley told reporters here late Monday.
He said that low oil prices also enabled India’s government to rationalise subsidies.
“It has also enabled us to increase the cess around fuel which has been diverted for infrastructure creation,” Jaitley said.
Oil prices, at the levels they have been during the last few months, created a favourable environment for the Indian economy, he said.
He also said low oil prices also means effectively transfer of wealth from the producing nations to the consuming nations.
Jaitley’s two-day visit to the oil exporting United Arab Emirates (UAE) is aimed at wooing the UAE investors with various attractive investment opportunities that India provides.
UAE has an important place in India’s energy security as the sixth largest import-source of crude oil in 2014-15.
The Indian basket, comprising 73 percent sour-grade Dubai and Oman crude, and the balance in sweet-grade Brent, plunged to $39.89 on Monday for a barrel of close to 160 litres.
The Organisation of Petroleum Exporting Countries (OPEC) basket of twelve crudes closed at $38.18 a barrel on Monday. On Friday, the price went below the $40-mark for the first time in 11 years, closing at $39.21.
Oil prices have been under pressure for several months due to concerns over oversupply, but the slump has deepened in the recent period.
Crude-oil production has remained robust despite the large drop in prices in the last year, as US producers continue to cut costs and OPEC members keep producing at full tilt.
The current drop below $40, after being in the $43-47 range for the last fortnight, is being attributed to uncertainties created by the terror attacks in France last Friday.