Domestic crude export economically not justified: Centre tells HC
9 May 2016 11:34 PM GMT
With nearly 85 per cent of India's crude oil requirement being met by imports, it would not be "economically justified" to permit export of the country's domestic crude production, the Centre has told the Delhi High Court.
The submission was made by Additional Solicitor General (ASG) Tushar Mehta, appearing for the Ministry of Petroleum and Natural Gas, while opposing UK-based Vedanta group company Cairn India's plea for permission to export excess crude from its Barmer oil field in Rajasthan.
Defending its decision not to allow Cairn to export the crude, the ministry has said an empowered committee of secretaries has gone into the issue and concluded that India's energy security would be adversely affected by allowing crude oil exports as then "more expensive" and "lighter crude oil" would have to be imported.
"India has a total refining capacity of 223 million tonnes of crude oil. That in the present scenario only 38 million tonnes of crude oil from domestic production is available for refining in Indian refineries.
"That the balance (84.9 per cent) crude oil is required to be imported to meet the domestic refinery capacity. Hence, allowing export of domestic production of crude oil is not economically justified," the ASG told Justice Manmohan.
The ASG, assisted by central government standing counsel Anurag Ahluwalia, also told the court that Cairn has "complete freedom to fix the price of crude oil", that it sells to any domestic refinery, "on arms length basis" as the company has claimed it was forced to sell its share of crude to private players at prices 20 per cent less than global rates.
With regard to Cairn's earlier claim that selling its share of crude at lesser price has caused a loss of Rs 1400 crore to the government, the ministry told the court that "we do not want to earn profit out of our natural resources" and added that crude oil cannot be exported presently as per its policy of zero per cent export till India attains self sufficiency.
The court, thereafter, asked the government to place the policy before it by the next date of hearing on May 18. Cairn has a production sharing contract (PSC) with the government and under that the company gets 70 per cent of crude produced from the well and rest goes to the government.
Under the PSC, the government or its nominee can pick up the company's share of crude and what is not picked up, could be sold to private players or exported, Cairn has said in its plea.
However, after the crude is sold, government gets 70 per cent of the profits, the company has contended. It has claimed that as a result of selling the excess crude to private domestic companies like Reliance and Essar, at rates lower than international prices, government was losing about Rs 4.5 crore per day.
Cairn had said it had made several representations to Directorate General of Foreign Trade for permission to export the crude, but did not get any response. Prior to this, it had written to the Indian Oil Corporation Limited (IOCL) to "canalise" export of the crude, but got no response from it as well. IOCL is the canalising agent for export of crude.
Canalising agents are those through which a product can be imported or exported by companies which do not have permission to do so directly.
Govt allows Iranian oil firm to buy office in Mumbai
Keen on strengthening ties with Iran, the government has allowed National Iranian Oil Company (NIOC) to buy office in Mumbai and is processing requests to allow three of its banks to open branches in the country. With the lifting of international sanctions, major economies including China and Korea are courting Iran, which has the world's second-largest gas reserves after Russia. Not to be left behind, India too is keen to raise its engagement with a nation which once was its second biggest oil supplier. Prime Minister Narendra Modi is likely to visit Tehran shortly to bolster ties. "Permission has been granted to NIOC for purchasing property for an office," a finance ministry official said.
Indian refiners are looking at nearly doubling buying of crude oil from Iran's national oil company, NIOC to 20 million tonnes this year and it having a permanent office would help trade. Also, Iran has sought permission for three of its banks to open branches in India. "Bank Pasargad and Parsian Bank want to open offices in India while Saman Bank is interested in opening a subsidiary," the official said. "The Iranian request is being looked into by relevant authorities including the Reserve Bank of India."
The Finance Ministry had in 2012 declined permission to Parsian Bank to open a branch in India apparently due to security concerns and threat of money laundering. The ministry decision then was based on a report from RBI. In that year, Home Ministry too had denied security clearance to applications by Parsian Bank and the other two banks fearing threat of money laundering and terror financing in banking transactions as cautioned by the Financial Action Task Force (FATF). "The applications are being examined," the official said. Establishment of banking channels is key to Iran regaining the trade it lost due to sanctions. But while the sanctions were listed in January, it still is not able to access past oil dues, including nearly $6.5 billion from Indian refiners, as it is yet to be accepted in global banking system.
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