NEW DELHI, June 9: With the review on import procedures for crude oil/petroleum products running into problems, the government will continue to lose precious foreign exchange estimated at $ 1 billion over the last 10 years due to the fact that its purchasing methodes continue to be archaic.This is evident from the petroleum secretary's reply to the standing committee on petroleum and chemicals : ``Most of our systems have not changed from Warren Hastings time. We have to change the entire procedure.''The primary reason for the losses is two-fold.For one, with the government unable to get the import estimates right, the country ends up buying a lot more crude in the ``spot'' market than originally estimated. Except for 1994-95, the actual crude oil imports by IOC through ``spot'' buying has been almost double that of the quantum approved by the ministry of petroleum at the beginning of each financial year.What's worse, even in the ``spot'' market, it ends up paying a lot more due to the inappropriate tender-routed ``spot'' purchases. The canalising agency Indian Oil Corporation places the ``spot'' orders through tenders issued only to traders registered with it.According to the international petroleum consultants Keyser Inc of London, the country has lost close to $ 1 billion in the last decade due to this. Keyser said this a letter to the standing committee on April 11. It said: ``Government of India may have lost close to $ 1 billion, perhaps more, over the last 10 years by outmoded and in fact senseless `tender' purchasing, the only buyer of note to operate in this expensive way.''While advocating greater dependence on futures market through direct participation in the global market, Keyser has pointed out that the tender procedure is widely regarded as an outdated method of procurement. Methods adopted by IOC, it said, were resulting in ``continually high prices paid by India.''Even the comptroller & auditor-general (CAG) and the finance ministry have repeatedly cautioned the petroleum ministry from continuing this practice whereby supplies are sourced from a limited number of traders. The two have asked the ministry to tie up imports through term agreements and minimise the forex loss by reducing spot purchases through open tender.In fact, the finance ministry has repeatedly requested the petroleum ministry for a quantitative analysis of prices for crude oil purchases under long-term contracts and those through tenders in the open market.Indian Oil, however, blames the more-than-targetted ``spot'' purchases on the low indigenous production as well as higher capacity utilisation by the refineries. These unanticipated factors necessitate purchase of additional imported crude which cannot be tied up for with foreign oil companies mid-way through the financial year, it says.Officials in the petroleum ministry said that they were aware of a need to review the import procedure. In this connection, consultancy firm Arthur Anderson had been appointed by IOC to review the procedures. However, work on the report got stalled after the standing committee objected to the procedure for selecting Arthur Anderson.
