The Parliamentary Standing Committee for Petroleum & Natural Gas has flagged the delay by the Oil Ministry on conducting an audit on the rising trend of India’s spot crude oil purchases and whether it has resulted in cost savings.
The report deals with the actions taken by the government on recommendations on the subject—Review of Policy on Import of Crude Oil. The latest version of the report was considered and adopted by the panel on August 7, 2025.
In their original report, the panel had acknowledged the strategic need of the oil PSUs to enter into spot contracts in order to fulfil their instant demands. However, it had desired to know whether the rising trend of spot purchases in the oil PSUs has also resulted in cost cutting.
“As such the committee had recommended the Ministry to conduct a study/audit to see whether the spot tender purchases have actually saved money over the years. The reply of the Ministry is silent on it,” it added.
The committee, therefore, reiterates their earlier recommendation to conduct a “study/ audit” to see whether the purchases in spot tenders have actually been promoted to be cheaper.
Spot Vs Term contracts
The panel observed that overall spot purchases which were around 27.58 per cent in FY18 rose to 35.13 per cent in FY23.
India’s crude oil imports from the spot market rose to 49.6 million tonne (MT) in FY23, or 35.13 per cent. This is the highest on record in volume terms (till March 2023). Term cargoes in FY23 stood at 91.6 MT, or 64.87 per cent, of the total imports.
While term contracts ensure supply security, spot contracts offer operational flexibility, with pricing for both tethered to prevailing market rates.
The committee acknowledged that oil PSUs have autonomy to decide their purchases of crude oil and are the best judges to decide on the type of purchase for crude oil from international markets.
“However, keeping in view the significant increase in percentage of spot tenders in the last few years, the committee would like to caution the oil PSUs to plan their crude purchases, so that the average cost of purchases in spot tenders should be at a lower cost than term contracts,” the panel emphasised.
In its response, the Oil Ministry had said that in formulating crude oil import strategy, PSU oil companies “meticulously” consider factors.
These include techno-economic elements, supply security, international political and trade relations, availability in the spot market, geographical diversity of supply sources, maintaining a balance between term and spot procurement, ensuring refinery flexibility and anticipating increased crude oil demand due to upcoming processing capacity expansions.
“Furthermore, the dynamic nature of spot market, influenced by market forces and geopolitical dynamics, underscores the need for a nuanced approach. Assessing gains or losses isn’t solely contingent on crude oil prices but also on factors like shifts in product demand, refinery shutdown schedules, refinery configurations and product crack spread,” it had explained.
Published on August 17, 2025
