Rule changes help evolve India’s growing oil market
new delhi/mumbai — Freed from a layer of fusty bureaucracy, India’s state refiners are helping the country evolve an oil market that reflects its status as both the world’s fastest growing major economy and oil consumer.
Changes to import rules mean officials from India’s state-owned oil refiners no longer have to stand in the corridors of the Oil Ministry waiting for government bureaucrats to approve their spot imports. They can now strike deals in as little as two hours, resulting in savings for consumers and lower costs for the companies.
This freedom allows state refiners, which control two-thirds of India’s 4.6 million barrels per day (bpd) of processing capacity, to compete on a more level playing field with lessregulated private refiners like Reliance Industries Ltd, and is encouraging investment in infrastructure.
“Earlier, I was required to reconcile my crude requirements with the availability of government officials. Now, I can float a tender whenever I want,” said A.K. Sahoo, head of finance at Mangalore Refinery and Petrochemicals Ltd. “There is definitely a saving in crude cost and needs to borrow for working capital requirements.” B.K. Namdeo, head of refineries at state-run Hindustan Petroleum Corp, said the new system that was introduced in April has improved pricing efficiency by allowing him to react faster to changes in market conditions. “State refiners will definitely be getting some monetary gains because of short duration tenders,” said Tushar Tarun Bansal, a director at Singapore-based consultancy Ivy Global Energy.
The state refiners hope that the improved flexibility will boost refining profit margins toward the levels of private firms. State-run refiners have historically reported margins of $6 to $10 per barrel versus almost $15 for firms like Reliance. In a sign of that growing confidence, Bharat Petroleum Corp Ltd (BPCL) plans to spend $6.75 billion through 2022 to boost refining capacity by 62 per cent to meet rising fuel demand.
Helped by the loosened rules and surging fuel demand, foreign investors are seeking opportunities in an economy growing at eight per cent annually and where the population is set to overtake China’s within a decade. — Reuters