* State firms to tap spot market for cheaper oil cargoes
* Move likely to boost margins of state refiners
By Nidhi Verma
NEW DELHI, April 6 India’s cabinet on Wednesday
agreed to let state-owned oil refiners devise their own crude
import policies so they can secure cheaper oil cargoes in an
oversupplied market and improve profitability.
The new policy puts state-owned refiners on a par with
private firms such as Reliance Industries and Essar
Oil that are not bound by government rules and can
earn hefty refining margins.
The previous policy limited purchases by state refiners to a
handful of companies and refiners were also missing out on the
chance to grab cheap, distressed cargoes as they were required
to launch spot tenders two months before receiving the oil.
State refiners Indian Oil Corp (IOC), Hindustan
Petroleum Corp, Bharat Petroleum Corp, and
Mangalore Refinery and Petrochemicals Ltd control 60
percent of India’s 4.6 million barrels per day (bpd) capacity.
“Now, with this flexibility, state refiners can encash the
opportunity to buy distress cargoes and negotiate prices with
sellers,” Hindustan Petroleum’s (HPCL) refineries head B. K.
State refiners, on an average, buy 70-80 percent of their
oil through annual supply deals, also called term contracts,
with the remainder coming through spot purchases.
India has decided to replace its decades old import policy
at a time when major oil producers are focused more on
protecting their market share than boosting prices, which has
led to a global supply glut and a collapse in prices.
The decision will give state refiners a high degree of
autonomy in operational, financial and investment matters and
reduce government interference, Telecoms Minister Ravi Shankar
Prasad told a news conference after a cabinet meeting.
“With the whole market becoming flexible world over, at
times we have to make on the spot decisions,” Prasad said.
Under the new policy, state refiners will need board
approval for oil purchases and must comply with anti-corruption
“As the government has delegated more power to the
companies, we now have to be more responsible to ensure that we
get optimum value from the purchases and ensure that we are
buying legal barrels,” HPCL’s Namdeo said.
(Editing by David Clarke)
The article India crude import policy overhaul gives state refiners leeway was originally published at Reuters - US Energy.