Financial Daily from THE HINDU group of publications
Monday, Mar 11, 2002
Exports & Imports
Industry & Economy - Exports & Imports
IOC monopoly over import ends -- BPCL makes first spot crude buy
MUMBAI, March 10
INDIAN Oil Corporation's (IOC) monopoly over crude imports for public sector oil majors has finally ended, with Bharat Petroleum Corporation Ltd (BPCL) completing its first-ever crude import.
BPCL made its first spot purchase of 70,000 tonnes of Abu Dhabi Murban crude through the Singapore-based Shell International Trading for April delivery, sources said.
Until now, oil PSUs were purchasing crude through the official canalising agency, IOC.
Another oil major, Hindustan Petroleum Corporation Ltd (HPCL), is also ready to make its first independent crude imports sometime in April, the sources added.
The Union Government had issued a policy amendment order in January ending IOC's monopoly over crude imports for State-run oil companies after April 1, 2002.
The policy permits oil PSUs to import crude through term contracts, spot purchases and issue of tenders.
"Most of our crude requirements are met by local crude which is of good quality. Importing the remaining requirement on our own will give us the freedom to choose the quality of our crude. This was difficult when buying through IOC,'' a BPCL official said.
Of the average 19 million tonnes of petroleum products marketed by BPCL, only 8.5 million tonnes are processed at its Trombay refinery.
About six million tonnes of crude is bought from ONGC, which leaves scope only for about 2.5 million tonnes to be imported.
On an average, India processes about 102 million tonnes per annum (mtpa) of crude.
Of this, only 40 mtpa is used by PSU refiners, while 24 mtpa is imported through Government-to-Government contracts. The rest is bought through international spot purchases made by IOC.
Crude oil imports will also provide PSUs such as BPCL and HPCL the much-needed "exposure'' for acquiring permission to hedge.
According to Reserve Bank of India (RBI) guidelines for hedging in international commodity markets, oil companies can hedge only if they have adequate "size and tenure of exposure''.
International banks such as Citibank, ABN Amro and Morgan Stanley have been courting both BPCL and HPCL for partnering futures trades.
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