Cabinet defers IOC's decision to charter ships

NEW DELHI: The Cabinet on Monday held up a decision on allowing the country''s largest refiner Indian Oil Corp (IOC) to directly charter ships for crude oil imports instead of going through Transchart, the centralised charter wing attached to the shipping ministry.

"No decision was taken today," a senior government official said but did not give reasons.

It is learnt that shipping ministry was opposed to IOC''s move.

As per the existing policy, the import of government-owned /controlled cargos should be done only on free-on-board (FOB) basis with the shipping arrangements finalised through Transchart to achieve the goal of least-cost imports of oil PSUs. Under FOB Contracts, the buyer (importer) will be responsible for making shipping arrangements.

In line with this policy, IOC was importing crude on FOB basis so far and the shipping ministry monitored the charter arrangements.

Officials said IOC wanted to make its own shipping arrangement to reduce its freight bill and improve refinery margins, as competitive bidding and negotiations help reduce the freight which accounts for about 10% of the value of imported crude.

IOC imported 25.87 million tonnes of crude oil worth Rs 27,461 crore in 2002-03 of which the freight component was about Rs 1200 crore.

In January, a committee of secretaries had suggested that direct charter by IOC be tried for a year before a final consent is given.

The policy was to be amended to allow IOC to charter ships with the condition that it will continue to give preference to FOB over cost & freight (C&F) imports and offer the right of first refusal to Indian flag vessels.

Shipping contracts are currently finalised through Transchart, the charter wing of ministry of shipping, to consolidate cargo and get volume discounts. However, this has prevented a direct relationship between IOC, shipping companies and brokers.