IOC convinces ministry to reject Reliance proposal

Vol 6, PW 16 (09 Oct 02) Midstream & Downstream

WITHIN TWO MONTHS, the oil ministry responded to Reliance.

Based on feedback from Indian Oil, Bharat and Hindustan Petroleum, it was on expected lines. According to the ministry, jet fuel hydrants have nothing in common with 'Natural Monopolies' like product pipelines and cannot be categorised as a 'Common Carrier'.

This was one of the reasons why these hydrants were excluded from the definition of common carrier systems set out in the Petroleum Regulatory Board Bill now before parliament. The oil ministry advises Reliance to sign commercial arrangements with the PSUs if it wants to share existing hydrants at the airports.

Unsurprisingly, Indian Oil rejects Reliance's attempt to poach its market. "As per international practice it is not obligatory on the part of the owner-company or companies to allow additional participants in the hydrant refuelling system, unless covered under certain concessions or agreements," writes IOC.

According to IOC, the models of ownership and operation of jet fuel hydrants suggested by Reliance have not been adopted in India. "PSU oil companies do not intend to offer existing hydrant refuelling facilities to new entrants." In addition, IOC says it is incorrect for Reliance to say oil companies have been compensated for construction of the jet fuel hydrants through a 12% post tax return.

In its letter to the ministry, IOC talks of, "massive investment of resources" made in construction of the facilities and its belief that, "new entrants partaking of the facilities at this stage will severely hamper the commercial interest of oil PSUs.