Aviation fuel joint venture: RIL's bid spooks oil marketing companies, AAI

The government’s plan to have a joint venture (JV) to sell aviation turbine fuel (ATF) has hit the slow lane, with the state-run oil marketing companies (OMCs) and Airports Authority of India (AAI) failing to reach a decision on bringing in Mukesh Ambani-led Reliance Industries (RIL) as a partner in the venture. 

Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL), along with the AAI, have been planning to set up the venture for sharing ATF infrastructure across the country. 

The OMCs and the AAI are washing their hands of the decision to include RIL. While state-run OMCs are blaming the aviation ministry for the exclusion of private players, sources in the aviation ministry said the OMCs were against the move, as they did not want to lose the monopoly in the aviation market. 

After the government conceptualised the infrastructure, RIL had approached the aviation ministry and the petroleum ministry, seeking to be included in the joint JV. 

The plan was to allow open access to all ATF players for fuelling and storage facilities in most airports, excluding Delhi, Mumbai, Bengaluru, and Hyderabad. The venture was expected to be in place by the end of 2016.

While an official claimed the AAI was of the view that the inclusion of RIL would not let the joint venture take decision freely, an AAI official said, “We have no problem. The state-run OMCs and RIL are not agreeing to each other’s terms.”

Aviation sector officials said OMCs do not want private sector participation, fearing they would lose their monopoly in the ATF market.

The three state-run OMCs have a majority share of over 90 per cent in the ATF market, while private players, such as RIL and Essar Oil, own the remaining market.

In the proposed JVs, the AAI would have had 25 per cent, while the remaining was to be held by the OMCs. 

RIL and the OMCs are currently locked in a dispute over sharing of pipelines at Mumbai’s Chhatrapati Shivaji International Airport. RIL had approached the Petroleum and Natural Gas Regulatory Board, seeking its intervention to declare these pipelines as common carriers. 

BPCL and HPCL operate two pipelines to supply jet fuel (ATF) to airlines at the Chhatrapati Shivaji International Airport, Asia’s busiest airport. On an annual basis, fuel trade worth about Rs 100 billion is conducted at the Mumbai airport. 

ATF consumption recorded a growth of 13.1 per cent in June 2018 over the same month last year, and 13.4 per cent for the April-June 2018 period over the same time last year, according to the Petroleum Planning and Analysis Cell. 

Despite the end of the tourist season, the discount offers by airlines pushed India’s June 2018 air passenger traffic higher than the preceding month.

Passengers carried by domestic airlines in June stood at 11.3 million, against 9.6 million during the same month last year. The continued high growth in domestic passenger traffic has resulted in increasing ATF demand, with an annual growth rate  of 7.7 per cent in the last five years.