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India’s own benchmark for fuel exports

business Updated: Mar 17, 2009 21:44 IST
Anupama Airy
Anupama Airy
Hindustan Times
India’s own benchmark for fuel exports

The world’s leading energy information provider, Platts, plans to shortly develop a country-specific benchmarking platform for export of petroleum products from India. This would ease the way for Indian refining companies and traders, who have been thus far using reference points linked to Singapore and Arab Gulf, to arrive at the value of petroleum products exported from India.

What is a benchmark?
A benchmark is used as reference point in commodity trading and to derive related commodity prices. For trading of petroleum products from Asia, the most common benchmarks currently used are Singapore Platts and Platts Arab Gulf.

Why should there be an India-specific benchmark?
With almost 100 million tonnes per annum of refining capacity to be ready by end-2011 on the Western coast, India will emerge as an important destination for export of petroleum products. Even land-locked refineries are connecting themselves to the coast by laying product pipelines for exports.

How will it work?
Oil refining companies exporting their products usually float tenders. All the parties including direct buyers as also traders have to quote against the existing benchmarks or price formulas of products. These differ from company to company — Indian Oil uses Platts and Argus quotes, while Reliance and Essar use Platts Singapore or Platts Arab Gulf. Now, there will be an India benchmark available.

How will it help companies?
An India-specific benchmark will help in reflecting the value at which petroleum products would be exported from India. After the country gets its own benchmark, export of petroleum products by India refiners would be done quoting this benchmark to traders. India would then witness big trading activity like those of Singapore and Dubai.

How big is all this?
Exports of petroleum products is the largest foreign exchange earner for India — the country earned close to $27 billion in 2007-08 and in the first nine months of the current fiscal, exports of petroleum products have already crossed $23 billion.