IOC snaps marketing ties with Reliance Petro

New Delhi, Jan 4: The Indian Oil Corporation (IOC) has terminated its marketing agreement with Reliance Petroleum (RPL) following insistance by the latter that IOC lift 100 per cent of Jamnagar refinery output on take-or-pay basis as against the earlier commitment of 52 per cent.

"We terminated the agreement with RPL for marketing of petroleum products last month as the country’s largest refinery wanted us to lift their entire output of 15 million tonnes on a take-or-pay basis as opposed to our commitment of about 8.5 million tonnes," senior IOC sources said.

As per the original agreement, IOC committed to marketing 52 per cent (about 8.5 million tonnes) throughput of RPL on take-or-pay basis till 2008 while the remaining was to be marketed by a joint venture (JV) company of IOC and RPL.

With no sight of the JV getting approval, RPL wanted the remaining 6.5 million tonnes also included in the marketing arrangement with IOC on take-or-pay basis which was opposed to IOC.

"It would be difficult for us to absorb the entire amount of product in times of depressed demand without sacrificing offtake from our own refineries," sources said.

Reliance officials were unavailable for comments. Sources said that IOC was also upset with RPL’s plans to sell its products on its own from next fiscal as it ran against the spirit of the marketing agreement.

RPL wants to enter direct marketing since the Jamnagar refinery was likely to produce 2 million tonnes additional products beyond the tied-up output of 15 million tonnes. IOC had in 1999 signed a marketing agreement for directly shifting 52 per cent of marketable products from RPL for sale through its own network of 7,549 retail outlets and 3,436 gas agencies, under a ‘take-or-pay’ contract till 2008.

While at present HPCL and BPCL market the remaining RPL product in equal proportions, IOC had signed a memorandum of understanding (MoU) to sell the same through a JV company in the post APM period.
When RPL insisted that IOC lift the entire marketable product from April one, 2002, when the agreement with HPCL and BPCL expires, IOC questioned the tolerance of the contract, sources said.

— PTI