RIL finds it tough to get share in ATF supply JV

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New Delhi | Published: August 7, 2018 4:22:09 AM

Airports Authority of India and state-run oil firms have refused to allow a private firm to be a part of the JV to supply ATF at AAI-operated airports.

AAI and the OMCs have not been able to decide on the percentage of shareholding each will get in the proposed JV. (Representational photo)

In what could hit Reliance Industries’ (RIL) aviation turbine fuel business, Airports Authority of India (AAI) and national oil marketing companies (OMCs) have refused to allow the private firm to become a shareholder in a proposed joint venture (JV) which seeks to set up common infrastructure to supply ATF across all major airports operated by the state-owned authority.

Two sources close to the development said that while AAI – under the civil aviation ministry – wants to have only the state-owned suppliers, OMCs, which have established infrastructure at airports, are not in favour of extending “ownership” rights to private players in the JV. They are ready to allow the latter access to the infrastructure for a fee.

In 2015, AAI held consultations with the ministry of petroleum and natural gas along with the OMCs to develop common infrastructure to import and store ATF which would reduce cost of the fuel. Later, RIL showed interest to be a part of the JV but has not found favour.

“While RIL wants to be a part of the joint venture, AAI and OMCs are concerned about operational issues in the future,” said one of the sources.

Under the open access model, currently operational at some private airports such as Delhi and Hyderabad international airports, common storage facilities are provided to be used by ATF suppliers for a pre-decided fee. Airlines get to choose the oil company for supply of fuel through a competitive pricing mechanism. Jet fuel cost constitute around 50% of the total operation cost of airlines.

However, OMCs and AAI are not willing to let private operators enter the JV as it may open a can of worms. “The land is that of AAI and set ups belong to OMCs. If today one private player is allowed to have ownership and share profits of the JV, tomorrow others may also want to be a part of it. Private sellers can definitely use the facility for a fee,” said the second source. Emails sent to AAI, RIL the OMCs (Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Oil Corporation) did not get any response till the time of going to press. AAI operates 125 airports in the country.

Also, AAI and the OMCs have not been able to decide on the percentage of shareholding each will get in the proposed JV. Apart from RIL, Shell India sells ATF in the country and Nayara Energy, formerly Essar Oil, also plans to enter the retail jet fuel market in the country.

Separately, the state-owned fuel marketers are also against a regulatory suggestion by the Petroleum and Natural Gas Regulatory Board to allow RIL to use pipelines, owned by BPCL, to sell ATF at the Mumbai airport. At present, the three OMCs fuel all aircraft at the Mumbai airport.

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