Mumbai, Dec 2: The Centre has made it categorical to Dutch oil major Shellthat it will not be allowed to enter direct marketing of petro-productsuntil it invests Rs 2,000 crore in a refinery. "The rules will not bealtered despite the fact that multinationals are reluctant to participate inIndia's refining sector," top sources said.Shell had recently held talks with Government officials to express itsinterest in entering retail trade of petro-products. The company indicatedthat an investment in refining was not a practical option at this stage.However, the Centre has made it clear that there is no way the Rs 2,000crore clause on refinery investment will be waived to permit direct accessto marketing.
The condition was clearly stipulated in the Nirmal Singh committee report onoil reforms. The alternative is for a company to produce three milliontonnes of crude annually and the logic here was to encourage multinationalsto participate in India's upstream sector and boost domestic output. Shellhad initially planned a 26:26 joint venture with Bharat PetroleumCorporation to commission a 6.75 million tonne refinery in Allahabad. Thecompany withdrew from the plan and decided, instead, to team up with SaudiAramco in a unique downstream proposal to market products directly.
As per the plan, the duo would hold 50 per cent equity in the venture whilethe balance would be taken up by one of the three marketing giants - IOC,BPCL or HPCL. The PSU concerned would have to spin off its retail assets tothe venture whose value would form its equity contribution. The petroleumministry shot down the proposal following strong protests from the oilcompanies.
The Government is believed to be of the view that it makes little sense tohave a cluster of oil companies when mergers, alliances and takeovers makegreater sense. For instance, there is no point continuing with the conceptof stand-alone refining companies which, logically, should be in the handsof stronger marketing allies.
Refining rule
Oil firms keen on marketing petro-products believe that the rule regardinginvestment of Rs 2,000 crore in refining needs to be re-defined. They feelthe Government should take into account their interests in other fields likeLNG, power and ports.These companies reiterate it makes little sense forIndia to contemplate additional capacity at this stage. They are now waitingfor a possible policy change which would allow open bidding for some strongmarketing oil PSUs
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.