Hit by higher borrowings, interest costs and delayed government compensation, the three state owned oil marketing companies are cutting crude oil inventories.

Indian Oil Corporation the country’s biggest refining and oil marketing company, has brought down its crude inventory from 6.5 million tonnes about a month before to 5.7 million tonnes. It is working to reduce this to 5.4 million tonnes.

Mr RK Ghosh director (refineries) at IOC said that “The effort has reduced the company’s working capital requirement and lowered the scope of a FOREX loss in case crude oil moves downwards.”

IOC processes around 160,000 tonnes of crude oil daily at its 10 refineries put together. A stock of 5.7 million tonnes is sufficient to cater to 35 days’ requirement.

The decrease of 800,000 tonnes in crude inventory has helped the company bring down its working capital requirement by around INR 3,200 crore, considering a price of INR 40,000 for a tonne.

When it succeeds in bringing inventory down to 5.4 million tonnes, the decrease will be to the tune of INR 4,400 crore. This translates into an annual saving on interest outgo of INR 450 crore to INR 500 crore.

Indian refineries’ total crude inventory consists of three parts. The first is non pumping crude, which remains at the bottom of tanks. Second, inventory which takes care of requirements during transit time, till the next crude tanker is delivered for processing. Third, the stock required to take care of unforeseen factors like a delay in tanker arrival, port conjunction, time preparation after receipt into refinery tanks, etc. Of these three, only the last factor is controllable and this is being reduced by companies.

Hindustan Petroleum Corporation also brought down the combined inventory at its two refineries from around 1.1 million tonnes to 850,000 tonnes by tinkering with the emergency crude inventory. The company processes 49,000 tonnes of crude daily at its two refineries.

(Sourced from BS)