Ioc May Lose Crude Canalising Monopoly

4-man panel of refining companies to chart deregulation route

The government has decided to review the exclusive status enjoyed by Indian Oil Corporation (IOC) as the canalising agent for import of crude oil and petroleum product into the country.

A four-man committee with representatives from all four refining companies including IBP has been set up to look into the matter. The committee held its first meeting in Mumbai recently. Among those who attended were BPCL director (marketing) V K Raina and director (finance) S D Gupta, HPCL director (marketing) S K Kapoor and IOC executive director (international trade) V K Aggarwal. The move marks a step towards total deregulation of the oil sector and dismantling of the administered pricing mechanism.

 

According to petroleum ministry sources, the committee will look at the pros and cons of IOCs monopoly status and debate whether a new arrangement can be worked out to function in a deregulated scenario.

The committee is expected to examine alternatives to the current arrangement, including giving powers to the other three refineries to import crude and petroleum products.

The ministry wants options in place in case the administered pricing mechanism goes and imports are freed, say ministry sources. BPCL and HPCL have misgivings about being thrust into the global oil market suddenly if the administered pricing mechanism is dismantled. They feel global oil traders will take advantage of their inexperience by charging higher prices and dont want to be caught napping, sources explain.

IOC is the countrys sole canalising agency for not only crude oil, but also major petroleum products like diesel, kerosene, petrol and aviation turbine fuel. It operates in the market by floating a global tender and sells the products to the refineries. In case of crude, the transfer is made at the pooled f.o.b. (free on board) price currently Rs 1,700 per tonne while in case of products, the transfer is made at the ex-refinery price, which is same for all refineries.

Since all the public sector refineries are chalking out plans to compete more effectively in a deregulated environment, they also want to gather experience in oil and product imports. Both BPCL and HPCL import large quantities of petroleum products for sale, apart from their own domestic production. In 1996-97, for instance, BPCL sold nearly 16 million tonnes of petroleum products, of which half was imported.

BPCL and HPCL are wary of continued dependence on another company for crucial things like crude oil imports, and will be much happier to handle it themselves.