Reliance accuses PSUs of breaking agreement

Vol 7, PW 2 (07 Apr 03) Midstream & Downstream

RELIANCE IS accusing Indian Oil, Hindustan and Bharat Petroleum of contravening offtake agreements for products from its 27m t/y refinery at Jamnagar.

We understand Reliance made its views known to the oil ministry last month, complaining that the three PSUs are in breach of the agreement, which cover offtake of Reliance products from 1st April 2002 (when the government abolished controlled pricing) to March 2004. Specifically, Reliance accuses IOC, HPCL and BPCL of not paying the agreed price set out in the agreements.

"The oil marketing companies have not been revising refinery transfer prices of kerosene, LPG, petrol and high speed diesel in line with the product offtake agreement signed with them with effect from 1st April 2002 resulting in huge financial impact on Reliance Industries." Most worrying for Reliance is the price it gets for LPG and kerosene. According to Reliance, IOC, BPCL and HPCL have maintained the same refinery price for Jamnagar LPG since 1st November 2002 and for kerosene since 1st January this year despite the hike in international prices.

Reliance insists the offtake agreement compels the PSUs to calculate the refinery transfer price of kerosene and LPG "at import parity price at Jamnagar based on the formula given by the government of India for the purpose of the subsidy scheme." Reliance says its agreements offer protection against "any changes in the product prices in the international market" as all of this would be "passed on by them (oil PSUs) to the consumers on a monthly basis." Because oil PSUs have frozen their purchase price, Reliance finds itself exposed to fluctuations.

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