The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Dhiren Chotaliya, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur


The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to replace the existing policy on crude oil import by Oil PSUs and vest the oil PSUs with the power to evolve their own policies. This will provide a more efficient, flexible and dynamic policy for crude procurement, eventually benefiting the consumers.

Background Under the existing policy for import of crude oil which was approved by the Union Cabinet in 1979, oil PSUs traditionally were allowed to source crude only from national companies of oil-producing nations. In 2001, the Cabinet approved some amendment to the policy. While the current policy has ensured that collective energy needs of Oil PSUs are consistently met over the years, the policy needs to evolve with the changing times. With the changing geo-political environment, the crude oil import policy needs to be modified to bring it in tune with current needs. The current market practices for purchase of crude oil on spot basis also need to be adopted to compete effectively in the market. The current policy has certain limitations and restrictions in this regard, which limit the potential sources and methods of procurement.

After the last decision of the Cabinet in 2001, the Govt. of India has delegated substantial powers to Navaratna and Maharatna companies among PSUs. Such companies are given high degree of autonomy in various operational, financial and investment matters.

Accordingly, the Cabinet has approved that the Oil PSUs of the Govt. of India shall be empowered to evolve their own policies for import of crude oil, consistent with CVC guidelines and get them approved by the respective Boards. This measure, which is in keeping with the principle of Minimum Government Maximum Governance, will increase the operational and commercial flexibility of the oil companies and enable them to adopt the most effective procurement practices for import of crude oil.


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