As part of its efforts to make Indian firms globally competitive, the government has allowed refiner Indian Oil Corporation and exploration firm Oil and Natural Gas Corporation to set up oil trading and risk management desk.

"IOC and ONGC have been permitted to set up specialised trading desks to further optimise oil procurement by tapping market opportunities and enhancing use of risk management tools to mitigate price risks arising from volatile international oil prices," government sources said.

ONGC plans to set up a trading desk in New Delhi for optimising procurement of crude oil for its subsidiary Mangalore Refineries and Petrochemicals Ltd, marketing crude oil received from investments in oil fields abroad and exporting products.

IOC, India's largest petroleum refiner, wants to scrap its current system of importing crude oil through tenders and adopt modern practices.

The two companies are likely to appoint consultants for setting up the trading and risk managing desk shortly, sources said.

Presently, IOC imports crude oil, including five million tonnes from Iran annually on term contract, for MRPL.

"With this, ONGC would import all crude including the term contract with Iran, for MRPL," they said.

Sources said IOC was studying a report of KPMG, the consultant it appointed to suggest options for setting up oil trading desk in India. IOC also plans to operate in the Singapore over-the-counter market for risk management.

The company, which buys almost half of its 32 million tonnes crude oil imports from the spot market, had been talking to British Petroleum for a year on cooperating in crude imports and risk management. Last year it abandoned talks and decided to go alone.

IOC choose India over London as it provided the advantage of operating in both Asian and European time zone. A trading desk in India would be able to capture the Singapore market when it opens in the morning (Singapore being ahead of India in time) and the American market when it closes.

ONGC wants to optimise export of surplus products like jet fuel, gasoline and fuel oil from MRPL as also its own production of value-added products like LPG, kerosene and naphtha, which till now are being done through tenders that give little margins, sources said.

Besides managing risk and hedging volatalities in the international oil market, the desk would also help the firm locate buyers for 3 million tonnes per annum crude oil it would receive from a Sudan oil field.

ONGC is bringing 1.3 million tonnes of Sudan crude for processing at MRPL this year and has hired Trafigura of London to trade its remaining share in the Greater Nile Oil Project in Sudan.