New Delhi: India, the world’s third-biggest oil importer, is considering cutting oil purchases to soften the blow from high crude oil prices and declining rupee, Indian Oil Corp (IOC) chairman Sanjiv Singh said on Monday.
State refiners are looking at optimising crude oil inventory levels without in any way affecting fuel supplies in the domestic market, he said. Refiners maintain 7-8 days of inventory in tankages besides carrying stocks in pipelines as well as ships in transit. They are looking at reducing these so that monthly imports of crude oil can be reduced, he said.
India is the third largest importer of crude oil and rising international crude oil prices are inflating domestic transport fuel rates in a strong demand environment. Brent, the benchmark for half of world’s oil, climbed to $80 per barrel from $71 in the last five weeks, and the Indian rupee lost ground against the dollar by 5-6 per cent during the same period, resulting in expensive crude imports.
India is 81 per cent dependent on imports to meet its oil needs.
“We had a meeting last to last Saturday (September 15) to deliberate on a host of issues facing the industry and in that meeting, one of the options that was considered was to reduce imports by cutting down on inventory levels,” Singh said.
An important factor guiding the decision was also Asian Premium climbing to as high as $3-5 per barrel in last 3-4 months, he said.
Asian Premium is extra charge being collected by oil-cartel Opec (Organization of the Petroleum Exporting Countries) members from Asian countries when selling oil in comparison to western countries.
“Reducing inventory levels and imports are being considered as temporary measures without impacting fuel supply in the domestic market,” he said. “This decision would in no way be allowed to impact supplies of petroleum products in the domestic market. Our commitment to meet domestic supplies remains supreme,” the IOC chairman said.
Singh said the high oil prices will in long term impact demand and so reducing imports makes sense.
India imported 18.6 million tonnes of crude oil in August for $9.8 billion. It had imported 18.1 million tonnes of crude in the same period of 2017 for $6.4 billion. During April-August, it has spent $48.9 billion on import of 94.9 million tonnes of crude compared to $31 billion on the import of 89.1 million tonnes in the same period last year.
Singh, however, did not say when the move will kick in saying these are ongoing discussions. “One thing is very clear that we do not want petroleum product supplies in the domestic market to be impacted in any way,” he said.
Petrol on Monday crossed the Rs 90-mark in Mumbai as rates across the country touched a new high. While petrol in Delhi costs Rs 82.72 per litre, it costs Rs 90.08 in Mumbai. Diesel is priced at Rs 74.02 in Delhi and Rs 78.58 in Mumbai.
Since mid-August, the petrol price has risen by Rs 5.58 a litre and diesel by Rs 5.3 a litre – the most in any month since the daily price revision was introduced in mid-June last year.
Petrol prices were hiked by 11 paise per litre and diesel by 5 paise, according to price notification of state-owned oil firms on Monday.
In Mumbai, petrol now costs Rs 90.08 per litre at IOC outlets while it is priced at Rs 90.17 per litre at Hindustan Petroleum Corp (HPCL) outlets and Rs 90.14 at Bharat Petroleum Corp (BPCL) stations.
Delhi has the cheapest fuel rates among all metros and most state capitals because of lower taxes. Mumbai has the highest sales tax or VAT.
According to oil companies, refinery gate price of petrol, without considering any central or state tax and dealer’s commission, is Rs 42.04 per litre. The same for diesel is Rs 45.34 per litre.
Retail rates are arrived at after adding excise duty, which is charged by the central government, commission paid to petrol pumps dealers and VAT, charged by the state governments.
Dealer’s commission on petrol currently is Rs 3.66 per litre and that on diesel is Rs 2.52 per litre.
Diesel at IOC’s outlets in Mumbai costs Rs 78.58 per litre, at HPCL’s stations for Rs 78.67 per litre and comes for Rs 78.67 per litre at BPCL pumps.
Petrol in Kolkata costs Rs 84.63 per litre and diesel comes for Rs 75.95 per litre. In Chennai, petrol is priced at Rs 86.08 per litre and diesel at Rs 78.35 per litre.