Upstream oil companies not to offer discounts on crude below $60 per barrel

Upstream oil companies like ONGC, Oil India and GAIL will not have to offer any discount on oil supplied to state-run refining and marketing companies as long as international crude prices are within the $60 a barrel limit, the ministry of petroleum and natural gas said in a release.

The interim rules issued by the ministry exempts state-run upstream oil companies from paying any discount to downstream refiners in Q4, as long as the crude oil prices remain below $60 per barrel.

The discount in prices provided by upstream oil companies on crude oil and natural gas help the government partly meet the subsidy on fuels and cooking gas by compensating oil marketing companies.

The new rules, which are applicable only for the three months to June, can be extended beyond June with the approval of the finance ministry.

For prices between $60 and $100 a barrel, the companies will have to give a discount of 85 per cent of the incremental price increase above $60, reports quoting sources said.

The government had last quarter, exempted ONGC, Oil India, and GAIL from paying any subsidy after global crude prices crashed.

Currently global oil prices are hovering at about $66 a barrel while the price of the Indian crude basket stood at $63.46 per barrel on Thursday, as computed by the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry.

This was higher than the price of $62.65 per barrel on the previous day (Wednesday, 20 May 2015).

In rupee terms, the price of Indian basket increased to Rs4,042.40 per barrel on Thursday compared to Rs4001.46 per barrel on Wednesday.