Indian state oil firm to buy its own ships to cut fuel transport costs

Most of India's oil needs are imported from abroad. Indian Oil Corporation, the state-run company that plays a major role in those imports, has so far used ships hired from other companies to bring in crude oil and liquefied petroleum gas (LPG). That practice has now seen a major change.

Rising tension in West Asia, particularly disruptions to shipping in the Strait of Hormuz area, has pushed up ship hire and insurance costs. Transporting a barrel of crude oil normally costs $2 to $2.50, but when additional ships are hired it rises to $8 to $10. The charge for transporting a tonne of LPG has also risen from $40 to $160-180.

To control these costs, Indian Oil has decided to buy its own ships. The board of directors of the company, which currently uses three crude oil tankers and nine LPG carriers on long-term charter, has approved buying its own vessels. Tenders for this have already been issued, and options to build the ships in India under the central government's Make in India programme are also being explored.

At the same time, India is diversifying the countries it imports oil from. With the Middle East's share down to 24 per cent, oil is also being imported from Russia, Africa, Brazil, America and Venezuela. So that refineries are not affected if supply is disrupted, the company has raised its crude oil stockpile from 33-35 days to 39 days.