RPL cries foul again over govt’s ‘step-motherly’ deal

Anupama Airy

New Delhi, July 16: Reliance Petroleum Ltd (RPL) has protested to the government that its 27-million tonne refinery at Jamnagar is being treated as mere balancing refinery from where products are absorbed only when public sector refineries do not produce or are shut down.

In a recent presentation before the Union petroleum minister Ram Naik, RPL has pointed out that products with negative tariff protection, including kerosene and domestic LPG, are selectively absorbed from its Jamnagar refinery while products with compensating tariff protection, like diesel and motor spirit, are not fully absorbed. “RPL is compelled to export these products at heavy penalties. On every occasion, the penalty for RPL increases as it is forced to export largely when prices are adverse,” it says.

Questioning the government on whether “the domestic market was reserved only for PSU refineries,” the company has put its losses on account of ‘forced exports’ of diesel and petrol during 2001-02 at a whopping Rs 515 crore. Out of this, Rs 468 crore is the loss projected by RPL for exports of 1.597 million metric tones of diesel and Rs 47 crore on account of forced exports of 1.128 million tonne of petrol during 2000-01.

Reacting to this, a senior petroleum ministry official said the capacity of the Jamnagar refinery, as recognised by the government, stands at 21 million tonne. Officials said in an agreement between RPL and Indian Oil, it has been clearly mentioned that RPL will not increase the capacity of its Jamnagar refinery beyond 21 million tonne till
2004. “So the permission given to RPL is for 21 mt capacity only.
However, after the delicensing of the refinery sector, RPL has increased its capacity to 27 million tonne and proposes to even increase this further. The surpluses from RPl are on account of the increased capacity from 21 mt to 27 mt and not due to inequitable absorption of its products in the domestic market,” said the petroleum ministry official.

As against this, RPL has also stated that the additional capacity of public sector oil refineries, which were created subsequent to commissioning of its Jamnagar refinery, was being given priority over Reliance in domestic absorption of diesel and petrol. It pointed out that in July 1999, following the RPL refinery commissioning, the total refining capacity was 96 million tonne in line with the then domestic demand of 96 million tonne. By August 2000, another 16 million tonne was added while the demand remained stagnant at 97 million tonne.
This adversely affected product offtake from its Jamnagar refinery as only 38 per cent of petrol and 84 per cent of diesel produced in 2000-01 was absorbed domestically as against near full absorption of products produced.

On the least transportation cost model (LTCM) for movement of petroleum products, RPL has stated that there are certain artificial constraints built in this model which increases costs. To this, the petroleum ministry officials said these RPL observations are genuine and are being looked into by the government.

“The model has to be such that it results into least cost to the pool account. Certain observations made by RPL such as manual corrections are genuine and will be looked into,” officials said.

RPL has also claimed that product offtake from its refinery had been at the expense of the newly-commissioned Numaligarh
refinery.