 "Ministry starts review of crude import policy based on House Panel recommendations")
The review has started based on the recommendations of the standing parliamentary committee, which was incidentally chaired by the ruling party member of the erstwhile Congress-led UPA government.
Officials said the policy is one of the steps to help build strategic crude oil reserves of 5.33 million metric tonne capacity besides bolstering other measures of oil exploration and production.
Also Read
The amendments are aimed at imparting more operational freedom to the PSU oil refiners to negotiate crude prices and other transport procedures in the import at par with their private peers. Officials explained that this has become necessary as oil subsidy is getting capped and under recoveries are becoming a constant problem for the PSU companies.
The PSUs import 70-80% of their crude requirement under long-term contracts and the rest under spot purchases. While the long-term contracts are entered into at the beginning of the financial year at fixed prices, spot purchases are contracted depending upon the price situation and demand and supply scenario in the domestic market.
Under the current guidelines, PSU oil companies are not free to negotiate prices with crude sellers. Even in conditions where price negotiation is profitable, the whole procedure has to be approved by the board, explained an official. By the time, the procedure gets approved, the price fluctuations become unfavourable for the PSU buyers. In the process, the PSUs are paying exorbitant premium on their purchases as there is no scope of negotiating the prices of the derivatives which they enter for hedging the prices of crude purchases.
Another area of concern change in the pattern of shipping of the crude. Most of the private players follow "Cost and freight" procedure where the supplier of crude arranges for the carriage of goods by sea to a port of destination, and provides the buyer with the documents necessary to obtain the goods from the carrier.
However the PSUs oil refiners follow "FOB shipping point" or "FOB origin" where the buyer or the PSU pays for shipping cost and takes responsibility for the goods when the goods leave the seller's premises
The review is also expected to give the companies freedom to shift to C&F method of transportation if they find it conducive, said officials.
Meanwhile, the PSU refiners are making significant efforts to diversify their crude oil supply sources from other regions as well. India's crude oil import basket is continuously expanding over last few years, with increased imports from South American and African countries. In addition to the efforts at geographical diversification of our import sources, efforts are being made to augment domestic production of oil and natural gas.
Besides, there are plans to meet the target of oil and natural gas production through re-development of existing fields as well as through development of new fields. Several development and re-development programs have been undertaken for all the assets of ONGC, including in Mumbai High and in Assam, said officials.