The Hindu Business Line : HPCL, BPCL allowed to charter ships directly for crude import

At a glance
IndianOil, BPCL, HPCL put together are expected to import 80 mt crude oil this year. The shipping bill is expected to be close to Rs 2,600 crore.

New Delhi March 29 Putting an end to the tussle between the Ministry of Petroleum and Natural Gas and the Shipping Ministry on the arrangement for import of crude, the Union Government on Thursday allowed the State-owned oil companies to charter ships directly for oil transportation instead of going through the Government's ship chartering agency, Transchart.

More competitive

In a move that is intended to make PSU firms competitive with private firms who have no restriction on choosing their transport, the Cabinet Committee on Economic Affairs (CCEA) has allowed Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) to independently charter ships for import and export of crude oil and petroleum products, a senior official said. The Shipping Ministry has been opposing the proposal.

Based on the experiences of Indian Oil Corporation Ltd (IndianOil), which has been chartering vessels on its own since 2005, BPCL and HPCL had sought similar dispensation. IndianOil was granted exemption in June 2005 by the Cabinet, which allowed it to bypass the existing law on the State-owned companies needing to go through Transchart, the Shipping Ministry's central charter service.

The Petroleum Ministry has been pitching for direct ship chartering by the oil PSUs as it would provide a level playing field with private sector oil companies who had complete charge of their logistics arrangements. BPCL and HPCL will now set up chartering cells and may continue to seek advice of Transchart.

Sources said all PSUs - IndianOil, BPCL, HPCL - put together are expected to import crude oil of about 80 million tonnes this year. The shipping bill is expected to be close to Rs 2,600 crore. IndianOil, following the freedom to hire ships on its own, has spent Rs 1,300 crore on shipping bill in a year, saving about Rs 70 crore. While IndianOil's exemption for the year has been extended, BPCL and HPCL have also been granted permission, sources added.

The Shipping Ministry had contested IndianOil's example that it has saved on freight bill by making its own shipping arrangements. According to the Shipping Ministry, the savings mostly came in the form of discounts, which was offered by the foreign ship owners.

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