Oil PSUs to devise their own import policies
The Dollar Business Bureau
The Union Cabinet on Wednesday has given its consent to replace the existing import policy on crude oil, which provides leeway to the oil PSUs to evolve their own crude import policies. This is being done so that the PSU’s can get cheaper cargoes in an oversupplied oil market and enhance profitability. This will provide the state-refiners a more efficient, dynamic and flexible policy for obtaining crude oil, thus in turn, benefiting the end consumers.
The new import policy puts oil PSUs on the same line with private entities such as Essar Oil and Reliance Industries that are not bound by Government regulations and can earn substantial refining margins.
The existing policy, approved by the Cabinet in the year 1979 and amended in 2001, limited purchases by state-run refiners to only a few companies and they also do not have the chance to get cheap, distressed cargoes as these PSUs were required to launch spot tenders, 60 days before receiving oil.
With the changing geo-political environment, when the main focus of major oil producers is on securing market share rather than increasing the prices, India’s import policy for crude oil required to be modified to suit the current needs.
Briefing the reporters after the cabinet meeting, Ravi Shankar Prasad, Minister of Telecommunications & IT, told, “The new policy will provide the state refiners a leeway in their financial, operational and investment matters as well as reduce the government’s intervention.”
However, the new policy has certain limitations and restrictions, where state-run refiners will need to get approval from the board for oil purchases and have to abide by the anti-corruption guidelines.