The latest strategy worked out by Indian Oil Marketing Companies (OMCs) to stop importing costly diesel from the international market and source cheaper fuel from domestic private refiners would not translate into significant savings for the state-run firms or have any noticeable impact on the country’s fuel bill, according to experts.

India consumed nearly 74 million tonnes of diesel last financial year. Around 180,000 tonnes – or a miniscule 0.2% -- of this demand was met through imports. The diesel imports came at a cost of Rs 655 crore, around 0.1% of the country’s total oil import bill of Rs 4,82,000 crore in 2015-16.

“The volume and value of imports is miniscule. India is a net exporter when it comes to petroleum products including diesel. And the exports are only going to rise with the commissioning of IOC’s Paradip refinery. The impact of the deal with private refiners, in terms of gain for OMCs or the effect on oil imports, would not be a directional change. Also, as private refineries are mostly export oriented, it does not make much sense for the firms to sell the product in the domestic market a cheaper rate,” said a senior analyst from a consultancy firm.

Rising domestic demand and subdued global prices have so far fuelled Indian diesel imports, which have more than doubled from 84,000 tonnes in 2013-14. Also, private refiners had refused to bear central sales tax and coastal freight costs. The situation has now turned on its head.

Asia’s gasoil crack for the benchmark 500 parts per million (ppm) grade has risen to nearly $12 per barrel, almost double the value on 6 April as strong demand driven by a severe dry season has bolstered the market. Besides, the OMCs have been able to convince private refiners on sharing of sales tax and inter-state coastal freight costs.

“There have been discussions with the private refiners for quite some time on this issue. Now a final deal has been struck. Our Chairman has also said that imports were resorted to last fiscal only to meet the emergency demands in some parts of the country,” said a senior executive from Indian Oil Corporation (IOC).

News agency Reuters has reported India's state refiners may halt diesel imports after working out a temporary mechanism to resume buying the fuel from private processors if global diesel prices remain at current levels.

Source:.business-standard.com