"Such a decision is against the government's own rule of issuing the central concession tax form (form `C'). Genuine customers will face massive losses instead of profit earned by lower inter-state tax differential," Gulbarga-based Rajashri cement senior commercial manager KK Chitlangia told PTI here on Sunday.

Rajashri Cement is a division of Grasim industries and used to buy diesel from IOC's Maharashtra unit, availing huge benefits due to the concessional form `C'.

"Our consumption is 3,000 kilolitre (KL) per annum but now due to the ban we are looking for alternatives or even buy from private players like Reliance petroleum at a much higher rate", Chitlangia said.

In fact, the company has written a protest letter to IOC stating that such a move, which has also banned credit, would result in massive losses with an enormous rise in cost of production.

The oil PSUs had banned inter-state movement of diesel and naphtha by road in the wake of sales tax scam in Gujarat, Madhya Pradesh and Maharashtra.Early this month, Sultanpur-based Indo-Gulf Fertilisers and Chemicals, which is a major consumer of naphtha from IOC, also dashed off a strongly worded letter to IOC stating "As a business entity IOC is bound by contractual commitments and it cannot quote government policies as an excuse".

"I cannot agree less. Thanks to the directive, there is no difference in the prices offered by my company or HPCL and BPCL. Private players like Reliance and those who import oil will now have a field day", an IOC official said.

Following the ban, Bhilwara-based Sangam India Ltd has already started buying furnace oil from private oil importing companies like Birla International management firm and Adani Exports Ltd, both based in Kandla, Gujarat.

The company commands a major presence in the spinning yarn industry in Rajasthan and consumes 7,500 kl of furnace oil annually and prior to the ban was sourcing its requirement from IOC and BPCL.

"The government should have taken the plight of genuine consumers like us into consideration. Today I have to buy furnace oil at a price of Rs 9,800 to Rs 10,500. With the help of the form `C' my cost would have been phenomenally lower", executive vice-President G C Jain said.

Sources say the ban could also violate various memoranda of understanding signed by the PSUs with their respective consumer industrial units.

Moreover, the industrial consumers can also take legal action against the PSU in lieu of violation of the signed contractual agreements, they pointed out.