For Prelims: Strait of Hormuz, Time Charter vs Voyage Charter, Gross Refining Margin (GRM), Make in India, Company, Objective, Key Disruption, Crude Sourcing H1 FY27
For Mains: Energy security, supply chain resilience, vertical integration, Make in India, geopolitical risk, crude procurement diversification
Source:
The Hindu
5 facts for one-day exams
SSC, railway, police and teaching exams ask direct questions like these.
- Indian Oil Corporation (IOC) plans to buy crude oil and LPG carriers.
- IOC sourced 55% of crude from Russia in H1 FY27.
- Spot imports accounted for 87% of IOC's crude sourcing in H1 FY27.
- IOC reported a net profit of ₹21,630 crore in Q2 FY27.
- IOC is exploring domestic shipbuilding under the Make in India initiative.
Why in the news?
Indian Oil Corporation (IOC) plans to buy crude oil and LPG carriers to secure its energy supply chain as geopolitical tensions in West Asia disrupt shipping near the Strait of Hormuz, pushing freight rates and war-risk insurance costs sharply higher. The move includes exploring domestic shipbuilding under Make in India and optimising charter arrangements.
Summary
- IOC plans to acquire crude oil and LPG carriers to strengthen control over its energy supply chain amid West Asia crisis.
- The company is exploring three approaches: optimising charter arrangements, owning ships, and supporting domestic shipbuilding under Make in India.
- IOC sourced 55% of crude from Russia in H1 FY27; spot imports rose to 87% of crude sourcing from 50% in the previous fiscal.
Highlights
IOC's New Shipping Strategy
IOC plans to own crude and LPG carriers instead of relying only on chartered vessels, to reduce exposure to volatile freight markets.
West Asia Crisis Impact
Geopolitical tensions near the Strait of Hormuz have pushed crude freight rates from $2-2.50/barrel to $8-10/barrel on the spot market.
Make in India Link
IOC is exploring building ships domestically under the government's Make in India initiative to boost indigenous shipbuilding capacity.
Background
Indian Oil Corporation (IOC), India's largest oil refiner, has traditionally relied on time-charter and voyage-chartered vessels for crude and LPG transportation. However, escalating U.S.-Iran hostilities since late February 2026 have disrupted commercial movement near the Strait of Hormuz, a critical chokepoint for global oil shipments. Freight rates and war-risk insurance costs have surged, exposing the vulnerability of India's energy supply chain, which is heavily dependent on imported crude.
Key Analysis and Impact
IOC's decision to acquire its own vessels marks a strategic shift towards vertical integration and logistics resilience. The company's time-chartered crude carriers cost $2-2.50 per barrel versus spot rates of $8-10 per barrel, and LPG freight rates have risen from $40/tonne to $160-180/tonne. The move also supports the Make in India initiative by exploring domestic shipbuilding. IOC's procurement diversification is evident: Russian crude accounted for 55% of sourcing in H1 FY27, while spot imports rose to 87%. The company reported a net profit of ₹21,630 crore in Q2 FY27, driven by inventory gains and improved margins, but cautioned that geopolitical uncertainty remains a key risk.
Way Forward
IOC will continue to evaluate three approaches: optimising existing charter arrangements, owning ships, and supporting domestic shipbuilding. The company has already issued tenders and received board approval for a few vessels. Success in domestic shipbuilding could reduce India's reliance on foreign-flagged vessels and enhance energy security. However, geopolitical developments in West Asia and global crude price volatility will remain critical factors affecting IOC's procurement costs and profitability.
Background GK
Textbook concepts you need to understand this news
- Strait of Hormuz
- A narrow strait between the Persian Gulf and the Gulf of Oman, through which about 20-25% of global oil passes. It is a critical chokepoint for global energy trade.
- Time Charter vs Voyage Charter
- A time charter hires a vessel for a specific period, while a voyage charter hires it for a specific journey. Time charters provide cost stability; voyage charters are exposed to spot market fluctuations.
- Gross Refining Margin (GRM)
- The difference between the value of refined products and the cost of crude oil, expressed per barrel. It indicates a refiner's profitability.
- Make in India
- A national initiative launched in 2014 to promote domestic manufacturing, attract foreign investment, and boost indigenous production across sectors including defence and shipbuilding.
Facts to remember
Tap a card to see the answer. Try to recall it first.
How exams will ask this
- Data: IOC net profit in Q2 FY27 was ₹21,630 crore.
- Nodal Body: Indian Oil Corporation (IOC), a state-owned oil refiner under the Ministry of Petroleum and Natural Gas.
Don't make this mistake!
Examiners may ask about the Strait of Hormuz's location or the percentage of global oil trade passing through it, or confuse time charter with voyage charter. They could also swap IOC's profit figure with a loss figure from the preceding quarter (₹2,661 crore loss in Q1 FY27).
Write these in mains answers
- Energy security, supply chain resilience, vertical integration, Make in India, geopolitical risk, crude procurement diversification
Stuck? Get it in one tap
Indian Oil Corporation (IOC) is India's largest oil refiner. Because of fighting in West Asia near the Strait of Hormuz, shipping oil has become very expensive and risky. IOC now plans to buy its own ships to carry crude oil and LPG, so it does not have to rely only on rented ships whose rates have shot up. It is also looking at building ships in India under the Make in India plan.
- Indian Oil Corporation (IOC) plans to buy crude oil and LPG carriers.
- IOC sourced 55% of crude from Russia in H1 FY27.
- Spot imports accounted for 87% of IOC's crude sourcing in H1 FY27.
- IOC reported a net profit of ₹21,630 crore in Q2 FY27.
- IOC is exploring domestic shipbuilding under the Make in India initiative.
- Economy: Energy security and oil sector
- Security: Geopolitical risks and energy supply
Related concepts: Strait of Hormuz, Time Charter vs Voyage Charter, Gross Refining Margin (GRM), Make in India
Practice questions
Pick an answer, then read the explanation.
- Q1Easy
Indian Oil Corporation (IOC) is a state-owned company under which ministry?
Explanation: IOC is a state-owned oil and gas company under the administrative control of the Ministry of Petroleum and Natural Gas. The Ministry of Finance handles fiscal policy, the Ministry of Commerce deals with trade, and the Ministry of Power manages electricity, so B is correct.
- Q2Hard
Consider the following statements regarding Indian Oil Corporation's shipping strategy:
- 1.IOC plans to acquire crude oil and LPG carriers to strengthen control over its energy supply chain.
- 2.IOC's board has approved the purchase of vessels and tenders have been issued.
- 3.IOC will completely stop using chartered vessels and rely only on owned ships.
Which of the statements given above is/are correct?
Explanation: Statement 1 is correct: IOC plans to acquire crude and LPG carriers. Statement 2 is correct: board approval and tenders have been issued. Statement 3 is incorrect: IOC is examining three approaches including optimising existing charter arrangements, not eliminating them. Hence option C is correct.
- Q3Medium
What was Indian Oil Corporation's net profit in the September quarter (Q2 FY27)?
Explanation: IOC reported a net profit of ₹21,630 crore in the September quarter. ₹2,661 crore was the loss in the preceding quarter, ₹7,610 crore was the profit in the year-earlier period, and ₹6,948 crore was the inventory gain during the quarter. Hence C is correct.
- Q4Medium
What is the primary objective behind IOC's plan to acquire its own crude and LPG carriers?
Explanation: The primary objective is to secure energy supply chain resilience as geopolitical tensions near the Strait of Hormuz have disrupted commercial shipping and pushed up freight rates. Hence B is correct.
Frequently asked questions
1. Why is Indian Oil Corporation planning to buy its own ships?
IOC plans to acquire crude oil and LPG carriers to strengthen control over its energy supply chain as geopolitical tensions near the Strait of Hormuz have disrupted shipping and pushed up freight rates.
2. What percentage of crude did IOC source from Russia in the first half of FY27?
IOC sourced 55% of its crude requirements from Russia during the first half of the current financial year (H1 FY27).
3. What was IOC's net profit in the September quarter of FY27?
Indian Oil Corporation reported a net profit of ₹21,630 crore in the September quarter (Q2 FY27).
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- Original8 November 2026 · Read story
