Indian oil companies make more money from exports

Indian oil companies make more money from exports

By agencies   |   Monday, 23 May 2005, 07:00 Hrs
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NEW DELHI: Oil companies in India are rewriting the marketing mantra. Selling fuel in Indian retail outlets is no longer a money-spinner. Instead, exports of bulk quantities are turning out to be the real moneymakers, reports the Economic Times.

Result: oil companies are on an export binge raking in huge earnings, which have gone up by over 75 percent in one year alone.

“Made in India” fuels are the latest fad in India’s export basket. Export of petro-fuels crossed the $5.55 billion mark in fiscal ’04-05, up by 75 percent from the previous fiscal.

Stung by the low earnings in domestic sales, oil companies including Reliance, Mangalore Refineries and Petrochemicals Ltd (MRPL) and Bharat Petroleum Corporation Ltd (BPCL), are busy shipping cargoes of petrol, diesel and aviation turbine fuel (ATF) to far and distant markets. Skewed pricing policies back home are the biggest drivers for the increased exports.

The new export markets include the U.S., South America, and Europe. Reliance, which has the single largest refinery in the world, itself has sold about one-third of its total produce in the export markets.

And, this is only set to increase in the coming months. Increased exports also bring in an added incentive for oil companies who enjoy duty drawbacks on their crude imports.

A senior IOC board member says, “Selling petrol or diesel at the current rates in the retail market gives us a lower earning than what we get by selling abroad. This is a reversal of the trend so far.” Oil industry sources say that the artificially controlled retail prices in the country coupled with the lower duty protection have now provided a new incentive to export, the report added.

Even companies like Reliance, which till the other day was trying to get into long-term sale contracts with domestic oil marketing companies, is now not so keen to sell domestically.

According to a Reliance official, “We have what you call an arms length contract. This allows us flexibility and we decide on the quantum to be sold to the PSUs on a month-to-month basis.”

Indian oil companies have exported more than 17,000 thousand metric tons of petroleum products in ’04-05. While petrol alone fetch foreign exchange earnings of $1,083 million, diesel exports worked out to an earning of more than $2,280 million, the paper said.

The biggest jump in exports was in the case of ATF, where export earnings went up to $833 million from $385 million in ’03-04.

Higher exports, however, is not a good news for the finance ministry. Exporters are eligible for duty drawbacks on their crude imports in line with the export value.

Higher exports by the companies would translate into higher duty free crude imports for the oil companies.

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