PSUs may buy crude from global comexes

In a bid to ensure "minimum" prices for imported crude, the government may allow public sector oil companies to buy crude from global commodities exchanges.

This will be in addition to the current system of importing crude through term contracts (typically one year) and spot purchases.

"The oil marketing companies will be allowed to employ modern trade practices such as commodity trading through exchanges.

To check the systems and practices involved, the entire process will be documented," a senior petroleum ministry official said.

The main benefit offered by such a process is flexibility. Once a comparison of crude prices is made, the oil companies can even cancel the tender if there is a price advantage.

Initially, the government purchased crude through the cannalised import route under which Indian Oil Corporation used to buy crude for the rest of the government-owned oil companies.

After the abolition of the administered price mechanism, government oil companies with refineries were given the freedom to import directly and also to make spot purchases.

However, spot purchases involve a tedious tendering process, with the due approval of the empowered standing committee of the companies. While 60% of the crude import is through term contracts, the rest is bought in the spot market.