Oil PSUs ban foreign vessels and chartering tankers with China connection for oil trade

Strained Indo-China relationships have made India's state-owned oil majors bar China-owned tankers and vessels to ship their crude and petroleum products.

According to sources with knowledge of the matter, China-owned and flagged vessels will be barred from bidding on tenders for chartering tankers to import crude oil into India, or export products such as diesel out of the country.

Will this move impact trade flow between India and China?

While this move may not impact trade flow between two of Asia's largest economies, it will contribute towards straining their relationship further.

This move follows India's implementation of business regulations with neighborhood nations (China and Pakistan namely) sharing its border last month. India's state-owned oil majors plan to ask traders and suppliers to not send crude oil shipments to India using Chinese vessels and tankers.

Three of the reputed oil majors -- Bharat Petroleum Corp., Indian Oil Corp. and Hindustan Petroleum Corp did not comment on this matter.

Barring foreign vessels and chartering tankers with China connection

Indian oil PSUs will stop chartering foreign tankers owned or operated by Chinese companies, even if the vessels are registered under third-country flags such as Liberia, Mauritius or Panama. Also use of Chinese vessels is anyways limited to transport and supply of liquefied petroleum gas only.

New trade curbs imposed by India are primarily aimed at limiting the participation of Chinese companies in orders and tenders offered by the government-owned Indian entities. India has already banned scores of Chinese imports in its recent move to become self-reliant India "Atmanirbhar Bharat".

The oil companies already have a first-right-of-refusal clause in favour of Indian flagged vessels in their global tenders. This means Indian tankers can acquire shipping contracts if they match the winning bid of foreign vessels. Going forward, companies will not invite bids from Chinese shipping entities previously registered with them, for limited tenders.