Shell doesnآ’t want to pay Rs500cr bank guarantee

Vol 7, PW 22 (28 Jan 04) Midstream & Downstream

If youre wondering why Shell hasnt begun its ambitious programme to build a chain of 2,000 petrol pumps across India the answer is simple: the Anglo-Dutch giant continues to contest the governments demand for a Rs500cr ($109m) bank guarantee.

Shells argument is compelling. The company claims it has met the governments criteria of Rs2, 000cr ($439m) investment in the countrys hydrocarbon sector and should be exempt from the formality of issuing a bank guarantee.

To prove it, Shell has submitted a detailed set of figures certified by accountants PriceWaterhouseCoopers showing that it has spent a total of Rs2, 103cr ($462m) across a range of oil-related businesses in Indias hydrocarbon sector. Leading the Shell campaign is its formidable India chief, Vikram Singh Mehta.

On 19th December, Singh told the oil ministry that incurred and expected investment at Shells Hazira LNG plant up to 31st October last year exceeds Rs1, 780cr ($391m) and that investments in oil exploration, lubes and an LPG import terminal came to a further Rs323cr ($71m). Total: Rs2, 103cr ($462m).

We have achieved the threshold qualifying investment of Rs2, 000cr`in India, writes Singh. We would therefore like to request your approval for the authorisation without a bank guarantee.

By all accounts Naik hasnt found the time to reply because on 13th January Mehta sent a reminder repeating his request that Shell be granted a marketing licence without furnishing a bank guarantee. Last May, oil minister Ram Naik announced that the government had approved a proposal to grant authorisation to Shell India Pvt Ltd for marketing of transportation fuels in India but that the authorisation is subject to the company furnishing bank guarantees to the government of Rs500cr towards fulfilling the commitment to invest Rs2, 000cr in the building of infrastructure in the hydrocarbon sector.