India’s cabinet on June 29 approved a plan that would allow local crude producers to sell oil to private companies, a move that would help raise revenue of state-run producers such as ONGC and Oil India.
The decision would be effective from Oct. 1, and existing conditions to sell crude oil to the government-run companies would be waived, the government said in a statement, adding that exports will not be permitted.
"Companies will now be free to sell crude oil from their fields in domestic market. Government revenues … will continue to be calculated on a uniform basis across all contracts," the government said.
India’s oil output has been stagnant for years, forcing the country to rely on costly imports. India, the world’s third-largest oil importer and consumers of oil, buys about 85% of its crude oil needs from overseas.
The government currently allocates crude produced by state-run ONGC and Oil India to various refiners. The two companies charge a flat rate for their crude, irrespective of the grade.
Shares of Oil India and surged after the announcement, settling 4.8% higher, while ONGC shares closed 3.2% higher.In the fiscal year to March 30, 2022, India produced 29.7 million tonnes of oil, a decline of about 2.6% from the previous year, according to the government data.