India for the first time has allowed state refiners to buy 35 per cent of their oil imports in tankers arranged by the seller, enabling them to swiftly tap cheaper cargoes. While US President Donald Trump is set to stall Iranian oil sales through a new set of sanctions, India’s move will help refiners in Iran’s second biggest oil market to boost purchases from alternative sources.
A letter by India’s shipping ministry dated September 19 stated that, “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%).”
The document reviewed by Reuters showed that the move taken up by Indian government is a measure to cut its surging oil import bill in the face of rising oil prices and a weaker Indian rupee.
India, world’s third biggest oil importer and consumer, had previously allowed the state refiners to buy only 15.48% of their estimated 118.15 million tonnes of oil imports in the current fiscal year to 31 March on a Cost, Insurance and Freight (CIF) basis, meaning the seller arranges the vessel and insurance. The rest was largely procured on a Free on Board (FOB) basis to help Indian shipping lines and insurers.
The step taken by government suggests that Indian refiners will be in a position to purchase more US oil, which is mostly available on a CIF basis, helping to compensate for the loss of Iranian oil supplies.
The shipping ministry said in the letter it would review the “outcome of this liberalised offer” before deciding on policy for the next fiscal year.