The PSUs which fall in this category are Cochin Refineries, Madras Refineries and Bongaigaon Refinery and Petrochemicals.

Sources said the petroleum ministry has already taken a stand that RPL, which is all set to commission its Jamnagar refinery, would have to bear export losses on its own. "This would naturally imply that the same rule applies to the PSUs to avoid any sense of discrimination," they said.

There were unconfirmed reports that both CRL and MRL plan to take up the issue with the petroleum ministry and seek a reprieve.

While officials of bothcompanies were not available for comment, sources said there was no way their request would be heeded as it would only trigger more confusion.

"Gone are the days of protection when the Centre would step in each time to help the oil companies. Today, the petroleum industry is in the midst of the second phase of reforms before it totally opens up in 2002. Some level of pain is inevitable but it will even out in the not-so-long run," observers say.

With market-determined pricing mechanism (MDPM) in place, the Centre has made it emphatic that there be no further burden on the pool account in absorbing an endless number of losses or subsidies. The issue has however raised an important point -- why not allow the stand-alone refiners to market products on their own?

After all, experts argue, they fulfil the requirements of the Nirmal Singh committee report on oil reforms which stipulates that to enter marketing, a company would either have to invest Rs 2,000 crore in a refinery or produce three milliontonnes of crude annually. RPL, MRPL and the two PSUs -- CRL and MRL -- are logically eligible.

RPL is already believed to have told the petroleum ministry that it is keen to get into marketing on its own with immediate effect. The company has only recently signed an agreement with IOC for this purpose though it really does not need to do. The compelling reason is absence of infrastructure, translated as retail outlets, where IOC is immensely strong.

Likewise, HPCL caters to marketing of MRPL's products as it is the joint-venture partner in the project with the AV Birla group of companies. Despite this, MRPL is exploring the option of carrying out this function on its own and has zeroed in on some international consultants who could carry out a feasibility study.

MRL and CRL have been lobbying hard for marketing rights as this function is presently catered to by their stronger PSU allies like IOC, BPCL and HPCL. Sources say that these companies would be better off if they had the advantages of marketingto be able to offset export losses. A beginning has been made, though in a small way, through the highway outlet scheme where both MRL and CRL can vend products on their own. Again, the biggest problem both companies face is generating funds to invest in retail outlets.

The petroleum ministry, in an earlier communique, had already told the private refiners that they should produce only such quantities of products which can be absorbed in the domestic market or be ready to export the surplus and bear the losses. In fact, the letter of intent issued to them by the government states: "It may be noted that a protected market, irrespective of cost of production, is not indefinitely guaranteed and accordingly, you may ensure that the refinery may be competitive at international prices and able to export products, if required."

Insight

Not a fair decision
The problem about how to account for exports assumes importance because India will shortly have excess capacity for refinery products.This leaves no alternative but exports, where losses will be booked. The suggestion by some private players was that the losses should be borne by the oil pool account. However, the Centre has not agreed to it, perhaps because the LoI included a clause that the refinery may have to export products, if required. Exports would affect the bottomlines. In a deregulated scenario, refineries have to bear export losses.

However, the problem is that deregulation has only been partial. Refiners can well argue that they should be free to determine the amount of high-margin decontrolled products they make, rather than supplying items like kerosene.

Manas Chakravarty