Indian Oil saves Rs1,000 crore in FY17 after crude import policy freedom
New Delhi: State-owned Indian Oil Corp (IOC) saved over Rs1,000 crore last fiscal after the government gave state-owned refiners the freedom to formulate their own crude import policies. IOC chairman B.Ashok said the freedom allowed the companies to decide on tenders for purchase of crude oil within a very short span of time.
“Earlier we used to take 36 hours to formalise a tender. This time was considered too much considering crude oil prices change every minute. This time has now been brought down to less than two hours,” he told reporters here.
The flexibility given in April last year allowed companies to decide on buying crude oil from spot or current market on their own instead of previous practice of a committee comprising company officials and a representative of the Oil Ministry deciding that.
The flexibility has led to oil companies shifting from traditional term or fixed tenure buying to spot purchases. “Term crude volumes used to be as high as 80% (of all the crude oil imported). We have brought it down to 68%,” he said. This flexibility has allowed oil companies to quickly finalise any crude oil available in the international market at an economical price.
“We have made tremendous savings because of this... more than Rs1,000 crore has been saved,” he said. Developing their own policies has helped oil companies adopt a dynamic, flexible policy for crude procurement, eventually benefiting consumers.
The freedom given to oil companies in April last year meant that PSU oil companies no longer needed approval of bureaucrats for deciding on spot imports. The flexibiilty will boost refining profit margins and give state-owned firms a level-playing field with private refiners. IOC Director (Finance) A K Sharma said the company will in current fiscal buy 4 million tonnes of crude oil on term or fixed contract from Iran as against 5 million tonnes bought last year.
Imports from Saudi Arabia will be almost flat at 5.6 million tonnes, those from Kuwait would rise to 6 million tonnes from 5 million tonnes last year. Volumes from Iraq will jump to 18.3 million tonnes from 15.6 million tonnes previously, he said adding Iraq is now IOC’s biggest oil supplier.