New Delhi: India has for the first time allowed state refiners to buy 35% of their oil imports in tankers arranged by the seller, a document reviewed by Reuters showed, enabling them to swiftly tap cheaper cargoes.

The move will help refiners in Iran’s second biggest oil market to boost purchases from alternative sources as US President Donald Trump prepares to halt Iranian oil sales through a new set of sanctions from 4 November.

The measure is part of a series of attempts by the world’s third-biggest oil importer and consumer to cut its surging oil import bill in the face of rising oil prices and a weaker Indian rupee.

India had previously allowed state refiners to buy only 15.48% of their estimated 118.15 million tonnes of oil imports in the current fiscal year to 31 March on a Cost, Insurance and Freight (CIF) basis, meaning the seller arranges the vessel and insurance. The rest was largely procured on a Free on Board (FOB) basis to help Indian shipping lines and insurers.

India’s shipping ministry told the country’s oil ministry about the move in a letter dated 19 September.

“Advance NOC (no objection certificate) is now granted to oill marketing companies to further import crude up to 23.07 million tonnes (balance 19.52%)," it said.

More than doubling the percentage of CIF cargoes the refiners can buy gives them much greater flexibility to take advantage of more speculative or distressed sellers who need to sell their oil quickly.

More flexibility

This also suggests that Indian refiners will be in a position to purchase more US oil, which is mostly available on a CIF basis, helping to compensate for the loss of Iranian oil supplies. US crude is currently trading at a discount of about $10 a barrel to the Brent global benchmark price.

“Basically that (the new higher limit) has increased flexibility (for us) to look at opportunities that are available around the world and buy most economic cargoes," said one source at an Indian refinery who asked not to be named.

“It was difficult for us to take advantage of the situation when traders or companies are going around with material in the ships," this source said.

The shipping ministry said in the letter it would review the “outcome of this liberalised offer" before deciding on policy for the next fiscal year.

“Previous approval for lower volumes was given before Iran sanctions were announced but (the) situation has changed now, for example, we cannot buy US oil on an FOB basis," said another source at one of the state refiners.

Record high retail prices for petrol and diesel are risking a populist backlash, which could hurt Prime Minister Narendra Modi’s government ahead of general elections next year.

India’s oil ministry and the four refiners, Indian Oil Corp , Mangalore Refinery and Petrochemicals Ltd, Bharat Petroleum Corp and Hindustan Petroleum Corp did not respond to a Reuters email seeking comments.

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