Petrol prices slipped below Rs 71-mark for the first time in eight months on Monday as India looks set to reap windfall from a price war among oil producers leading to international crude prices crashing by their biggest margin since the 1991 Gulf war.

For India, which imports over 84 per cent of its oil needs, the slump would lead to lower import bill and a cut in retail prices but will harm already stressed upstream firms such as ONGC. Lower oil prices will also help economy from its 11-year low growth rate by way of reducing input cost for a lot of sectors.

In Delhi, petrol prices dropped to Rs 70.59 a litre, the lowest since early July 2019, and diesel rate were cut to Rs 63.26, according to a price notification of state-owned firms.

Fuel prices have been on the decline since February 27 on international trends. Petrol prices have in all fallen by Rs 1.42 a litre since then and diesel rates have dropped by Rs 1.44 per litre.

But the only dampener in the entire scheme of things is rupee which settled 23 paise down at 74.10 against the US dollar. A weaker rupee means India pays more for buying the same amount of commodity from overseas. It will also help lower inflation rate.

According to the oil ministry’s petroleum planning and analysis cell, India is likely to pay USD 105.58 billion or Rs 7.43 lakh crore on import of 225 million tonnes of crude oil in the fiscal year 2019-20, which ends this month. This compares to USD 111.9 billio paid for import of 226.5 million tonnes of oil in 2018-19.

Oil company officials said the import bill will fall in the next fiscal beginning April but an estimation cannot be made given the extreme volatility in the oil and currency market.

It certainly will translate into lower retail prices of petrol and diesel in the coming days as the current rates do not reflect the slump in international prices, they said.

The fall in oil prices comes at a time when the global economy is already reeling under the impact of coronavirus, which has dented demand across sectors and economies.

Rating agency Icra said the plunge in crude oil prices is credit negative for Indian upstream companies as their realisations and cash accruals will decline. If the crude prices were to remain in the band of $30-40 per barrel, most of the Indian upstream companies could report losses, as the cost structure would remain rigid in the short-run.

Additionally, gas prices at various international gas hubs have declined, which would lead to lower domestic gas prices in the next fiscal. Accordingly, the realisations on gas sales would also decrease even as gas production remains either a break-even or a loss-making proposition for most fields for the upstream producers, notwithstanding some decline in oilfield services/equipment cost, Icra said.

International Energy Agency on Monday cut global oil demand forecast for 2020 by 1.1 million barrels per day as coronavirus spread beyond China.

For the first time since 2009, demand is expected to fall year-on-year, by 90,000 barrels per day to 99.9 million barrels per day in 2020.

“While the situation remains fluid, we expect global oil demand to fall in 2020 the first full-year decline in more than a decade because of the deep contraction in China, which accounted for more than 80 per cent of global oil demand growth in 2019, and major disruptions to travel and trade,” it said.