What is Indian Crude Basket?
The Indian Crude Basket is a weighted average of the prices of a specific group of crude oil blends produced by various countries commonly imported by India. The group of combinations is determined by the Indian government and is intended to serve as a benchmark for the price of crude oil in the country.
The Indian Crude Basket is calculated by the Petroleum Planning and Analysis Cell (PPAC), a unit of the Ministry of Petroleum and Natural Gas in India. The PPAC takes the price of each blend in the basket and calculates a weighted average using the quantity of each blend imported by India during a specific period, typically a month.
The Indian Crude Basket is essential because it serves as a benchmark for the price of crude oil in India, which is a significant importer of oil. It is used by the government to determine the cost of domestic fuel products such as petrol and diesel, and it is also used by the private sector to set prices for products like lubricants and petrochemicals.
The basket currently comprises Oman, Dubai, and Brent crude. The weightage of each crude oil is determined by the average of the crude oil imported during the last three financial years. The basket price is determined by taking a weighted average of the costs of the three natural oils.
The Indian Crude Basket is necessary for the Indian economy as well. The price of crude oil is a significant determinant of inflation in the country, and fluctuations in the cost of the Indian Crude Basket can significantly impact the overall economic situation. The price of crude oil is also closely tied to the country's balance of payments, as oil imports account for a large portion of India's total imports.
However, the Indian Crude Basket has some limitations as well. Firstly, it is based on the average price of a specific group of blends and may not accurately reflect the price of other blends that are also imported by India. Additionally, the basket is based on the average price of the blends during a specific time period, and may not reflect the current market price.
