📰Russia Trade Negotiations, Import Duties on Oil Cut, SOEs Increase Dividends

Good afternoon, 

Welcome to the best way to stay up-to-date on India’s financial markets. Today, we’re discussing

• India and the Russia-backed Eurasian Economic Union (EAEU) announcing free trade negotiations,

• India halving its import duty on crude edible oils to 10 percent,

• and the Indian government is pushing state-owned enterprises to significantly increase their dividend payouts.

Then, we close with Gupshup, a round-up of the most important headlines.

Have a question you want us to answer? Fill out this form, and you could be featured in our newsletter.

—Shreyas, [email protected]

Market Update.

India, Russia-Led Eurasian Bloc Launch Free Trade Talks.

India and the Russia-backed Eurasian Economic Union (EAEU) are set to kick off negotiations for a free trade agreement (FTA) later this year, in a strategic move that could significantly deepen economic ties between South Asia and Eurasia. The announcement comes as India simultaneously pursues trade pacts with the United States and the European Union, signaling its broader intent to diversify trade relations and reduce dependency on any one region.

“Negotiations on the free trade agreement should start this year,” said Russian Trade Commissioner to India Andrey Sobolev, speaking at an event in New Delhi on Monday.

Wait, who? The EAEU is comprised of Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia, a bloc rich in natural resources and energy reserves. An agreement with the group could provide India, the world’s fastest-growing major economy, with greater access to oil, gas, metals, and agricultural commodities. In return, Indian exporters could find new markets for electronics, pharmaceuticals, engineering goods, and consumer products.

“The free trade agreement has economic significance, but it also carries clear geopolitical weight,” said a New Delhi-based trade analyst. “India is signaling that it intends to be a serious player in Eurasia, not just an observer.”

A strong, Russia-centered trade zone: According to Sobolev, the EAEU is currently working on a “common financial market, independent payment infrastructure and stable settlements between Eurasian enterprises”, all of which could eventually extend to future trade partners like India.

Such systems could offer alternatives to Western-dominated payment platforms like SWIFT, especially in a global environment marked by increasing sanctions and trade restrictions. India has already shown interest in using local currency trade and digital payment systems in other bilateral deals.

How’d we get here? Talks around a potential FTA between India and the EAEU date back to at least July 2024, just prior to Prime Minister Narendra Modi’s visit to Moscow. The formal resumption of dialogue in 2025 reflects renewed momentum in India-Russia economic relations amid a shifting global trade order.

While trade volumes between India and EAEU nations have historically been modest compared to those with the West or China, both sides see potential in energy cooperation, defense production, and infrastructure development. As India seeks to achieve its $2 trillion (₹170.8 trillion) export target by the end of the decade, new FTAs are central to the country’s policy toolkit.

India Slashes Import Duty on Crude Edible Oils to Tame Prices.

In a bid to curb soaring food inflation and support its domestic processing industry, India has halved its basic import duty on crude edible oils to 10 percent, effective May 31. The move, announced late Friday, is expected to reduce the total effective tax burden, including cesses and surcharges, on crude oils to 16.5 percent from the previous 27.5 percent.

The decision comes as consumers have seen retail prices of packaged edible oils surge by as much as 30 percent over the past year. India, which relies on imports for about 60 percent of its edible oil needs, is the world’s largest buyer of cooking oils.

Who cares? “This is a win-win situation for vegetable oil refiners as well as for consumers,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India. “Local prices will go down due to the lower duty on crude oils, while domestic refiners will see improved margins.”

The government’s move widens the tax differential between crude and refined edible oils to 19.25 percent, up from 8.25 percent previously. This is expected to discourage imports of refined oils, particularly refined palm olein, and shift demand back toward crude variants. By doing so, it offers a lifeline to India’s refining sector, which has struggled with profitability due to narrow margins caused by earlier tax parity.

Impact on the world: Internationally, the decision is also expected to support global prices of crude edible oils. Crude palm oil prices in Kuala Lumpur have dropped nearly 13 percent this year amid oversupply and fluctuating demand. However, soybean oil prices in Chicago have climbed 16 percent over the same period, reflecting shifting global consumption trends.

India primarily imports palm oil from Indonesia and Malaysia, soybean oil from Argentina and Brazil, and sunflower oil from Ukraine and Russia via the Black Sea corridor.

Govt Demands SOEs Increase Dividend Payouts.

The Indian government is pushing state-owned enterprises (SOEs) to significantly increase their dividend payouts in the current fiscal year, aiming to strengthen public finances amid global uncertainty and growing domestic spending needs.

According to people familiar with the matter, the Department of Investment and Public Asset Management (DIPAM) has asked state-run firms to raise dividend contributions by roughly 25 percent over the previous year and to shift from annual to quarterly disbursements. The goal: to collect around $10.5 billion (₹900 billion) in dividends by March 2026, up from $8.67 billion (₹740.2 billion) in FY25.

Meetings are reportedly underway between DIPAM officials and executives from public sector companies, as the government seeks to ensure more regular and predictable cash flows into the exchequer. The Ministry of Finance has not officially commented on the move.

Wait...why? The push for higher dividends comes at a time when Prime Minister Narendra Modi’s administration has announced personal income tax relief for the middle class in its latest budget, part of a broader pre-election economic positioning. These tax cuts, while politically popular, have added pressure on the government to identify alternative sources of revenue without derailing its fiscal consolidation roadmap.

To meet its fiscal deficit target of 4.4 percent of GDP in FY26, the government is looking to dividend income as a key lever. A major boost has already come from the Reserve Bank of India, which transferred a record $31.50 billion (₹2.69 trillion) to the government earlier this year, well above market expectations.

SOEs become even more pivotal: India’s public sector undertakings (PSUs) have long played a pivotal role in funding government spending, especially during periods of muted tax collections or economic shocks. This year’s intensified focus on dividend contributions reflects the Modi government’s strategy to extract more value from the state’s commercial holdings without necessarily resorting to aggressive privatization.

Companies in sectors such as oil and gas, power, coal, and finance, including giants like ONGC, NTPC, Coal India, and SBI, are typically the largest dividend contributors. Analysts say the push for quarterly dividends may also align PSU practices more closely with global corporate norms and improve transparency for investors.

Short-term gain for long-term pain? While dividend payouts provide immediate fiscal relief, there are concerns about the long-term impact on capital expenditure and competitiveness of public sector firms. A sustained increase in mandatory payouts could limit the reinvestment capacity of some enterprises, particularly those in capital-intensive sectors or with ongoing infrastructure projects.

Still, government officials argue that many PSUs have strong balance sheets and sufficient cash reserves to accommodate higher payouts without compromising their growth plans.

Message from our sponsor.

Business news as it should be.

Join 4M+ professionals who start their day with Morning Brew—the free newsletter that makes business news quick, clear, and actually enjoyable.

Each morning, it breaks down the biggest stories in business, tech, and finance with a touch of wit to keep things smart and interesting.

Try it yourself (for free)

Gupshup.

Macro

• $84.3 billion (₹7.2 trillion) worth of RBI rupee shorts from months ago are pressuring the currency. The RBI enacted forward trades where they longed the rupee in the short term but shorted it in the long term to balance out their trades. Those long-term trades are now unwinding, and several private banks and traders expect a fall to ₹86 or even ₹87.

• India halves its tax on crude edible oils to limit prices. The levy is now 10 percent, which is to help the price spike seen in the oils (up 30 percent y-o-y); India is the largest importer of cooking oil globally. 

• India is toughening its US trade stance and wants all April 2 tariffs removed. DC had pushed back against this point last month when trade minister Goyal met with Lutnick. Now, however, appellate courts in the US are ruling that Trump’s tariffs are illegal, which could result in the removal of the 10 percent base rate. This furthers a shift in the global stance toward Trump’s policies, which were previously more deferential.  

Equities

• Brookfield-backed Leela Hotels is trading as India's 2nd largest IPO. The offering raised $409 million (₹35 billion), which should help add 7 new hotels across the country. Leela is consistently recognized as one of the best chains across India and currently owns 5 properties. It turned profitable last fiscal year after 2 consecutive years of losses from the pandemic hangover.  

• IndiGo partners with the Sky Alliance and buys 30 new Airbus jets. The Sky Alliance consists of Delta, Air France, Virgin, and smaller airlines. The partnership is the first one for a major Indian airliner, which opens up Asia to Europe and North America. The new flight route options now presented also made the airliner double its jet order to service those flights.  

• Adani Energy is doing a QIP to raise $502 million (₹43 billion) with equity. A QIP places new shares with interested investors who have to be large enough to qualify. Adani is prepping for global growth with his subsidiary; the company raised $900 million (₹77 billion) in debt to finance ports and acquisition opportunities.    

Alts

• A 3.5 percent remittance tax in the US would lead to greater crime and black-money operations. India currently gets $18 billion (₹1.6 trillion) in remittances each year from migrants living in the US.

• Builder.ai faked business with VerSe. Both companies billed each other identical amounts to boost their annual revenue metrics and gain investors. Builder was valued at $1.5 billion (₹129 billion), making it the largest AI company failure since ChatGPT came into existence. Builder.ai managed to fool creditors into lending by overstating actual revenue by 300 percent. 

• Adani Group outlined its transport network in its Mumbai-Dharavi slum rebuild. Dharavi will have rail, road, and airport travel facilities all in one location, similar to the NYC-JFK air-train network. Adani is also developing a riverfront promenade alongside the river north of Dharavi in addition to healthcare, industrial, and community recreational areas.  

Policy

• US DefSec Hegseth appealed to anti-China sentiment, but still needs to balance trade. He emphasized that the US would not be pushed out of the region and that Taiwan would be defended. He could not dispel concerns about the erratic trade policy of the US, which has caused most of South Asia to reel due to the trade surplus they hold with the US.  

• Bangladesh is charging ex-PM Hasina with crimes against humanity. Hasina is currently hiding out in New Delhi, with Bangladesh imploring India to extradite her. India has refused due to the new Bangla administration, resulting in anti-Hindu movements.  

• India confirmed it lost fighter jets in the Pakistan conflict. The government did not specify the count and also emphasized the point that the conflict was never close to nuclear. According to the ministry's claims, the number of jets lost has to be less than 6 since DefSec Chauhan said Pakistan’s claim of 6 lost planes is baseless.

See you Tuesday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.