Shift in Govt’s crude oil import policy may help IndianOil save 30 cents/barrel
Indian Oil Corporation Ltd (IndianOil) may end up saving about 20-30 cents a barrel in its crude oil import bill during the current fiscal, following an increase in purchases from the spot market.
“The share of spot has grown by 10 per cent in the overall mix since the government liberalised the policy to source crude oil…We are saving around 20-30 cents per barrel on these spot purchases,” B Ashok, Chairman, IndianOil, told BusinessLine.
In April 2016, the government replaced the existing policy on crude oil import by oil PSUs and empowered them to evolve their own policies. Till fiscal 2015-16, almost 80 per cent of the crude bought by IndianOil was through term contract and about 20 per cent through spot market, today spot purchase stands at 30 per cent.
Buying crude oil from spot market gives a definite price advantage, which the public sector oil refiners, such as IndianOil, were missing out vis-à-vis their private sector counterparts like Reliance Industries Ltd.
While it brings down the government’s import bill, in the long run the beneficiary of lower prices is always the consumer as the companies pass on the crude price fluctuations at the retail end.
IndianOil imported 49.004 million tonne of crude oil valued at ₹1,08,989 crore in 2015-16, against 43.919 million tonne valued at ₹1,65,065 crore in the previous year. In the current fiscal, the imports are expected to be about 60 million tonne.
Total crude oil imported into the country in 2015-16 was 202.8 million tonne valued at ₹4,16,579 crore and for the current fiscal, till February, the imports stood at 195.5 million tonne valued at ₹4,26, 888 crore.
The price at which Indian refiners sourced their crude during the current fiscal — April to date — stood at $47.46 a barrel and during the current quarter, it stood at $53.90 a barrel.
“Under the earlier regime, it used to take 36 hours for a spot tender to be finalised, we have reduced this to two hours now in some cases,” Ashok said, adding that “Since we have expanded our refining capacity, the flexibility of the 10 per cent more crude sourced through the spot market is even more.”
Earlier, all spot purchases needed the Empowered Standing Committee nod, which has been done away with now and an internal committee approves tenders, he said.
“The processing time is also subject to the evaluation of the quality of crude,” he added. IndianOil sources crude oil through term contracts from countries such as Iraq, Saudi, Kuwait, Iran, and Abu Dhabi. Smaller quantities also come from Mexico, Columbia, and sweet crude from Nigeria and Angola.