Falling global crude oil prices are turning out to be a boon for Prime Minister Narendra Modi, as his government is expected to save about Rs 88,800 crore from cheaper oil imports in 2015-16. 

International crude oil prices have halved to below $50 per barrel since June last year, as oversupply issues continue to weigh on oil prices.

The price of the Indian basket of crude oil currently stands at a six-month low of less than $50 a barrel. So far this year, the average price of Indian basket has stood at $58 a barrel.

The Indian basket indicates the average price of Oman and Dubai sour-grade and sweet Brent crude oil processed by Indian companies at their refineries in the ratio of 72:28.

"The government had budgeted for an average crude oil price of $70 a barrel for this financial year. If the average price of $58 a barrel is sustained for the rest of the year, it will lead to a saving of Rs 78,000 crore in companies' import bill, and of around Rs 10,800 crore in the government's subsidy bill," K Ravichandran, senior vice-president at research & ratings agency Icra, told Business Standard.

Currently, the government sees its import bill and subsidy expenditure to go down by Rs 6,500 crore and Rs 900 crore respectively for every $1 drop in the price of crude oil.

"The current subdued crude price is likely to continue for the next couple of years, owing to higher US shale production, Organization of Petroleum Exporting Countries' (OPEC's) insistence on not cutting production, and possibility of more oil from Iran. For us, it is a definite winning proposition," said Indian Oil Corporation (IOC) Chairman B Ashok.

However, the gains will be capped by the continued depreciation of the rupee against the US dollar. The import bill is estimated to rise by Rs 7,455 crore for every Re 1 depreciation in the domestic exchange rate, according to the government body Petroleum Planning and Analysis Cell (PPAC).

For the financial year 2015-16, the government, which has set aside Rs 30,000 crore towards petroleum subsidy, could see a savings of Rs 10,800 crore in the budgeted amount due to a decline in crude oil prices.

The country imported 189 million tonnes of crude oil amounting to $112 billion during 2014-15.