Cabinet deregulates sale of locally produced crude oil
2 min read . Updated: 30 Jun 2022, 06:25 AM IST
Premium- Govt-owned exploration and production companies can sell crude to private sector refiners
NEW DELHI : Amid a sharp surge in India’s oil import bill due to ongoing geopolitical tensions, the Union cabinet on Wednesday decided to allow more supplies of domestically produced crude to private oil refiners.
The decision concerns public sector oil exploration and production companies, the biggest of which is ONGC.
So far, these public sector companies were only allowed to sell domestically produced crude oil to government refineries. After the decision, applicable from October, these companies will be able to sell crude to private refiners as well.
Another related measure, aimed at freeing up supplies, was that these public sector companies will no longer be allowed to export crude, which they were free to do earlier.
A statement from the ministry of petroleum and natural gas said the decision will ensure marketing freedom for all exploration and production (E&P) operators as the condition in the production sharing contracts (PSCs) to sell crude oil to the government has been waived.
“All E&P companies will now be free to sell crude oil from their fields in domestic market. Government revenues like royalty, cess, etc. will continue to be calculated on uniform basis across all contracts," said the ministry.
Addressing the media, Union minister for information and broadcasting Anurag Thakur said: “Now, companies can sell their crude oil to any private company in the domestic market along with the government companies."
According to the government, the decision, building on a series of targeted transformative reforms rolled out since 2014, will spur economic activity and incentivize investments in the upstream oil and gas sector.
India’s oil import dependency over the years has risen, widening the trade deficit and putting further pressure on the domestic currency, which has slumped to its lowest against the dollar.
The percentage of crude oil import out of total crude oil processed in India has risen to 89.4% in 2020-21 from 87.1% in 2015-16. To be sure, Indian crude exports are negligible. Analysts said the decision may not have a major impact on the market as India’s production has been declining over the years. Despite government efforts, domestic crude production has been in decline since FY15, dropping to just 28.4 million tonnes in FY22.
Crude oil prices have largely been volatile and elevated since Russia invaded Ukraine in February. The August contract of Brent on the Intercontinental Exchange was $120.10 per barrel on Wednesday, higher by 1.80% from its previous close.
High international crude prices come as a major concern for India as it imports around 85% of its energy requirements.
The Union Cabinet also approved the strategic partnership agreement between the union ministry of new and renewable energy and the International Renewable Energy Agency, signed in January.
rituraj.baruah@livemint.com
