India has revised crude import rules to allow state refiners to buy an increased 35 percent part of their oil imports in vessels arranged by the seller, as reported by Reuters after reviewing an official document, enabling them to quickly tap cheaper cargoes.
As the second biggest buyer of Iranian oil, India has been in active preparation for increasing purchases from alternative sources as U.S. President Donald Trump ordered the reimposition of a new set of sanctions against Tehran’s petroleum sector, which will start Nov. 4. So the move India takes will help domestic refiners to make a successful transition.
The measure also came as part of efforts by the world’s third-biggest oil importer to cut back on its surging oil purchases as oil prices keep rising and Indian rupee struggles.
Following India’s previous regulation, state refiners are permitted to buy only 15.48 percent of their oil imports, an estimated 118.15 million tonnes, in the current fiscal year to March 31 on a CIF (cost, insurance and freight) basis, meaning the seller provides shipping and insurance. The rest was largely done on a Free on Board (FOB) basis to benefit local shipping lines and insurers.
India’s shipping ministry informed the country’s oil ministry of details about the new rule in a letter dated Sept. 19.
“Advance NOC (no objection certificate) is now granted to oil marketing companies to further import crude up to 23.07 million tonnes (balance 19.52 percent),” it said.
The 35 percentage quota for CIF cargoes would give the refiners much bigger room to take advantage of more speculative or distressed sellers who want to sell their oil as fast as possible.
The move would also render Indian refiners in a position to seek more oil imports from U.S. as they are mostly available on a CIF basis, in order to make up for the loss of Iranian oil supplies.
“Basically that (the new higher limit) has increased flexibility (for us) to look at opportunities that are available around the world and buy most economic cargoes,” said an unnamed source at one of the state refiners.
The move would benefit Indian Oil Corp (IOC) (IOC.NS), Bharat Petroleum Corp Ltd (BPCL) (BPCL.NS) and Mangalore Refinery and Petrochemicals Ltd (MRPL.NS), which plan to lift Iranian cargoes during the rest of the current fiscal year.
The shipping ministry said in the letter it would evaluate the “outcome of this liberalized offer” before deciding on policy for the next fiscal year.