Amid soaring fuel prices, India seeks reasonable rates from oil producers

India has asked crude oil producers, including OPEC, to price oil at reasonable rates and to provide better commercial terms like enhanced credit period, Minister of State for Petroleum and Natural Gas Rameswar Teli told the Rajya Sabha on Wednesday. Petrol and diesel prices have shot up to record highs across the country after relentless price increases since early May. Petrol is retailing above Rs 100 a litre in one-and-a-half-dozen states.

In a written reply to questions in the Upper House of Parliament, the minister said the world’s third-largest oil consumer has taken up with producing nations the need to price oil at reasonable levels. India, which imports almost two-thirds of its oil needs from the West Asia, has sought better commercial terms like optional volumes in yearly supply contracts and larger time to pay for oil bought. State-owned oil firms have term contracts guaranteeing a fixed volume of oil in a year with national oil companies of West Asian nations for import of crude oil, he said.

Also read: AR start-up Flam raises USD 3.5 mn in seed round led by Silicon Calley Quad

“Since the past few years, joint negotiations are held by the Ministry of Petroleum & Natural Gas and oil PSUs with national oil companies of West Asian nations for favourable term contracts like the inclusion of optional quantities in term contracts, enhancement of credit limit to oil PSUs in the crude oil import, etc,” he said. Most oil exporters such as Saudi Arabia and Iraq provide a 30-day credit period payment for oil bought has to be made in 30 days. India wants this period to be raised. Iran before US sanctions halted its exports in 2019, provided 90-day credit period.

“The government has been taking up the issue, bilaterally with crude oil-producing countries as well as with the Organization of Petroleum Exporting Countries (OPEC) for affordable crude prices for consuming countries like India,” Teli said in a written reply to a question. India imports 85 per cent of its oil needs and rates benchmarked to international prices have fuelled inflation. “Minister for Petroleum and Natural Gas held meetings with Secretary-General of OPEC and also engaged with heads of other international energy fora to convey India’s serious concerns over crude oil price volatility, and India’s strong preference on responsible pricing by producers and reasonable pricing for consumer countries, which is mutually beneficial for consumers and producers,” Teli said.

The new Oil Minister Hardeep Singh Puri has in the past few weeks flagged the issue of high oil prices to Saudi Arabia, the UAE, Kuwait and Qatar. Teli said prices of petrol and diesel were freed with effect from June 26, 2010, and October 19, 2014, respectively. “Since then, the public sector oil marketing companies (OMCs) have been taking an appropriate decision on pricing of petrol and diesel on the basis of international product prices and other market conditions,” he said. “The OMCs have increased and decreased the prices of petrol and diesel according to changes in international prices and rupee-dollar exchange rate.”

The retail price is fixed by the OMCs on the basis of 15-day rolling average price of petrol and diesel in the international market. There is also an impact of the dollar rate. He said the average price of the Indian basket of crude oil has gone up from USD 19.90 per barrel in April 2020 to USD 63.40 in April 2021 to USD 73.68 a barrel this month. “Thus, there has been a substantial increase in the price of crude in the last six months,” he said. On high taxes on petrol and diesel, he said the revenue generated by taxation is used in various developmental schemes of the government.