Indian Oil Corporation has raised $500 million through a five-year external commercial borrowing under the Reserve Bank of India’s concessional dollar-rupee swap window and may seek additional overseas funds before the facility closes in December, as below-market fuel sales increased the company’s borrowing requirement.
“We have raised $500 million under the RBI’s concessional swap facility and will examine raising more funds through the window, which is available until December,” IOC Chairman Arvinder Singh Sahney said.
RBI facility makes dollar loans cheaper
The borrowing was completed last week. The RBI introduced the discounted foreign-exchange swap window for external commercial borrowings by state-run companies to encourage dollar inflows and strengthen India’s balance of payments. The facility allows companies to lock in foreign-exchange hedges at below-market rates, reducing the effective cost of overseas loans.
IOC’s borrowings increased by about ₹20,000 crore during April-June, as the company continued selling fuels at prices below prevailing market-linked costs. The company’s funding requirement has also been elevated by under-recoveries on domestic cooking gas.
The fundraise comes as IOC works to protect crude oil and LPG supplies from disruptions caused by the West Asia conflict. The company has tied up crude supplies for the entire month of August and most of September, providing a supply cover of around 45-50 days.
“Crude has never been a problem. We are covered for the next 45-50 days,” Sahney said.
While disruptions affected supplies from IOC’s traditional Middle Eastern sources, the company replaced part of the shortfall with crude from West Africa and South America. It has been purchasing oil from countries including Brazil and Venezuela.
Russian crude currently accounts for around 48% of the total oil processed by IOC’s refineries, according to a company official. Indian refiners had increased Russian purchases after discounted barrels became available following the Russia-Ukraine conflict.
IOC is also prepared to continue importing crude from Saudi Arabia through a longer route around Africa if the regular shipping corridor remains disrupted.
IOC posts record fuel sales in June quarter
“We are prepared to buy oil from Saudi Arabia via a longer African route,” Sahney said.
The diversification helped IOC maintain refinery operations during the June quarter. The company processed 19.165 million tonnes of crude, its highest-ever throughput for the first quarter.
“We had the highest-ever first-quarter crude throughput of 19.165 million tonnes. Also, we had the lowest-ever quarterly fuel and loss of 8.04%, compared to 8.5% previously,” Sahney said.
IOC also recorded its highest-ever quarterly petrol sales of 4.5 million tonnes and diesel sales of 10.866 million tonnes. Natural gas sales volumes increased by 11%.
“My operational efficiency has benefited us,” Sahney said.
Refinery throughput was higher than the 18.683 million tonnes processed in the corresponding quarter of the previous financial year. The company’s overall domestic petroleum-product sales rose to 25.252 million tonnes from 24.973 million tonnes.
However, LPG emerged as the most disrupted commodity during the West Asia conflict, forcing IOC to look beyond its established supply markets. The company has begun sourcing the cooking fuel from newer geographies, including Algeria and Azerbaijan.
The sourcing shift is significant because India relies on imports to meet a substantial portion of its LPG demand, while West Asia has traditionally dominated the supply basket. Disruptions in the region can directly affect cooking-gas availability, shipping costs and the under-recoveries borne by state-owned fuel retailers.
IOC’s strategy now rests on maintaining a wider supplier base for both crude and LPG, while ensuring refineries continue operating at high utilisation levels. The company’s crude inventory, alternate sourcing arrangements and record throughput have so far helped prevent raw-material shortages from affecting petrol and diesel production.