Reliance Petroleum is committed to supply 2.5 million tonnes of motor spirit from its professed refining capacity of 24.5 million tonnes. Indian Oil's Panipat refinery should supply close to 3.6 lakh tonnes of motor spirit, out of its total refining capacity of a six-million-tonne per year. The 14 other refineries in the country produce nearly five million tonnes of gasoline to cater to the domestic demand.

The petrol surfeit is a sure pointer to a general surplus in petroleum products, since no oil company would willingly produce motor spirit for the overseas market when home prices are so much higher. The petrol exports this year are obviously only anoutlet for an unmanageable surplus.

Some products like kerosene and liquefied petroleum gas (LPG) will continue to be in short supply, because of the galloping appetite for these fuels within the country. In all other petroleum products, the country is expected to be more than self-sufficient this year.

Traditionally, less than 20 per cent of the throughput of Indian refineries have been light distillates, like petrol and naphtha. The more sought-after middle distillates, like diesel and kerosene, make up more than 50 per cent of a refinery throughput. The refinery partiality to middle distillates is understandable, when one considers that diesel alone accounts for 45 per cent of all the petroleum products consumed at home.

Right on cue Reliance Petroleum has announced a plan to process 12.6 million tonnes of diesel and kerosene, which is roughly 50 per cent of its refining capacity.

The Jamnagar refinery plans to set aside more than 10 per cent of its capacity for motor spirit, however, which ismore than usual. National oil companies tend to have a product mix, in which gasoline makes up only six per cent of the output. Gasoline is a costly fuel for transportation, compared to diesel and the demand for the motor gas has been growing slowly.

The demand for motor spirit has been growing at a modest pace of four per cent of late, compared to 6.9 per cent in the mid eighties and 5.9 per cent around 1996-97. Compared to the growth in consumption of products like LPG (increasing by 10 per cent a year) and naphtha (rising by 17 per cent a year) the annual increase in the demand for petrol is negligible.

The country has been self-sufficient in petrol for years. In the seventies, India even exported petrol. Since then, national oil companies have restricted themselves to exporting the most costly light distillate, naphtha.

Oil companies have restricted petrol production to just about match demand, even though motor spirit fetches an enormously better price in the home market than most other petroleumproducts. The refining cost of motor spirit is a little more than Rs 2 a litre, compared to close to Rs 8 a litre for kerosene. Even with marketing margins thrown in, gasoline is not an expensive fuel in most parts of the world.

At home, petrol is dearer because it pays for subsidised products like kerosene and LPG. No wonder then, that the market price for petrol should be close to Rs 23 a litre compared to Rs 2.50 for kerosene supplied through the public distribution system.

Refining companies, therefore, have very little incentive for exporting petrol. The national oil companies have been comfortably coping with the demand for petrol all along, matching production o domestic requirements. Naphtha exports have become necessary, because of the surplus generated every year.

Oil companies increased naphtha production by 2.5 per cent in 1996-97, compared to 5.5 per cent the year before. Even so, the country had an export surplus of 2.18 million tonnes. Then came the naphtha allocations for liquidfuel-based power plants. The 17 per cent annual growth in naphtha consumption trimmed the exportable surplus of oil companies to 1.4 million tonnes in 1997-98. The demand for the liquid fuel was so acute that Indian Oil even imported some naphtha some months ago. The new refining capacities have already bridged that gap in demand and supply. The year end will find oil companies at home exporting naphtha once more, with more than a million tonne of petrol thrown in as well.