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IOC to buy Reliance, Essar petro products; minister downplays oil MNCs' pull-out

Indian Oil Corporation is expected to sign a comprehensive marketing tie-up agreement with private refineries of Reliance and Essar by next month.

The plan envisages IOC buying 50 per cent of petroleum products produced by the refineries at import parity prices.

Under a broad agreement reached after year-long negotiations, Reliance and Essar whose 23 million tonne refineries in Gujarat are expected to go on stream early next year, will have the option to export rest of their production, Petroleum Minister V K Ramamurthy said on Sunday in New Delhi.

IOC can also buy the quota earmarked for exports if there is a compelling domestic demand at an agreed price. Describing this as a model agreement, Ramamurthy said this could help cut down foreign exchange outgo by 15 per cent. There was no need for clearance from the Union Cabinet for this proposal.

Ramamurthy said the agreement which has already been cleared by the IOC board will be in vogue for 10 years.

Refuting reports that there was rethinking on dismantling administered price mechanism and that serious differences have cropped up with the finance ministry, Ramamurthy said the liberalisation process is a package carefully calibrated to ensure that there was no major loss of revenue generation to the government.

He said the government has not taken a decision on the sensitive issue of reducing subsidy on liquified petroleum gas since a large number of people will be affected by such a move.

He said the current trend of international oil majors pulling out of refinery projects in the country will not in any way hinder the commissioning of around 40 million tonne of additional refining capacity during the Ninth Five Year Plan.

His remark was in reference to the recent decisions of Shell, Saudi Aramco and Oman Oil Company opting out of Indian refinery projects after having committed to participate in their equity holdings.

The minister described the backtracking by these majors as a global phenomena following the fall in refinery margins in the aftermath of crude prices in the international market dipping to an all-time low during the last few months.

Citing an example, he said Shell has recently wound up its operations in London.

The Bhatinda, Bina, Sultanpur, Paradeep and Nagapatinam refineries will go on stream as scheduled in spite of the attitude of the MNCs. The national oil companies are fully geared to complete the projects on schedule, he said.

He said most of multinational oil companies are keen only on dumping their products instead of investing in infrastructure sector, but the government's guidelines came in the way of their attempts to market their products.

Under these guidelines, the MNCs cannot market unless they invest a minimum of Rs 20 billion either on putting up a grassroot refinery or participation in joint ventures.

On government's policy towards private sector putting up product Pipelines, Ramamurthy made it clear that they will not be permitted to indulge in cut-throat competition with the public sector undertaking Petronet LNG. The ministry is holding discussions with them and a policy in this regard will be evolved in the next few months.

The Reliance group has sought clearance for putting up a product pipeline to evacuate its products from its Jamnagar refinery to Central india while Enron is planning a similar network for putting up power projects in southern India using liquified natural gas.

UNI

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