Reliance Industries Limited (RIL) may soon be allowed to sell diesel to the state-owned oil marketing companies. Faced with unprecedented growth in demand for diesel, the government is mulling easing norms to allow RILss export oriented refineries to the feed domestic market.
Alongside, the government is also considering a proposal to introduce differential pricing for diesel, which will make this fuel costlier for the non-transport industrial consumers including power producers like NTPC and other users in the SEZs and EoUs. However, bulk diesel supplies to the Railways, agriculture sector, as also the state transport corporations will continue to be given at the existing subsidised price.
During the first four months alone, diesel demand has grown at 18%. ?This unprecedented demand growth has seen domestic output fall short of the requirement and a total of 4.14 million tons of diesel may be required to be imported in 2008-09. Of this 1.267 million tons has been imported in April-July,? Indian Oil Corp chairman Sarthak Behuria said. Behuria said the shortfall can be met from the Jamnagar refinery of Reliance for which the Government has to amend present laws to avoid double taxation. The existing refinery of RIL at Jamnagar as also the upcoming refinery is an Export Oriented Unit and will have to first pay customs and then excise duty on the product, besides income tax on its profits when it sells fuel in the domestic tariff area (DTA). Customs and excise would total to over Rs 9 per litre of diesel. It is being examined if sales made by Reliance in the DTA can be given a deemed export status and the company continues to get income tax waiver. A similar arrangement has been worked out for LPG, where RILs sales to PSU oil companies in the DTA are considered to be deemed exports. A note for consideration of the appropriate authorities will be sent for the purpose, Behuria said.
At the meeting called by petroleum minister Murli Deora to discuss supply and distribution of petroleum products today, it was stated that extensive use of diesel in power generation in industrial and domestic sectors was resulting in a spurt in demand for diesel through retail outlets. The meeting was told that the shift from industrial fuels, fuel oil and naphtha, to diesel was due to diesel being priced at lower rates. Diesel production by IOC, BPCL and HPCL in 2008-09 is projected at 39.494 million tons. Demand on the other hand has been estimated at 54.788 million tonne. Of this, 11.154 million tonne is to come from standalone refineries leaving 4.14 million tonne to be met through imports. In 2007-08, the demand for diesel grew by 14.2 % and necessitated imports of 2.354 million tons. While transport and agriculture demand for diesel had grown by 10-12%, consumption by power producers and other industries had risen 30%.