Govt might wind up Petronet India Ltd

Officials say decision likely to be taken on Thursday, move as the model had turned unviable

About 15 years after it was incorporated, the Union Cabinet is expected to approve the winding-up of Petronet India Ltd (PIL), the financial holding company promoted by state-owned Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation in a meeting likely to be held on Thursday.

The company was formed in 1997 to establish and develop a petroleum products pipeline infrastructure in India. The infrastructure was to be set up through joint ventures and subsidiaries.

Officials in the know said a decision to end the company was being taken because the model had turned unviable. PIL's fortunes started to dwindle ever since the government allowed oil companies to set up their own long-distance produce pipelines till the time they kept some capacity spare for use by other interested parties.

This undermined the model under which Petronet India Ltd was created and talk started gaining ground of its winding-up as new projects dried up.

Petronet India Ltd comprises joint venture companies and subsidiaries, including Petronet VK Ltd, Petronet CCK Ltd, Petronet MHB Ltd, Petronet CTM Ltd, and Petronet CI Ltd. Some officials said promoter companies could be asked to buy out the entire stake of others and run the pipelines as their own.

Officials said one of the promoters of Petronet India Ltd, state-run Indian Oil Corporation did not partner for its Chennai-Trichy-Madurai pipeline.

The oil manufacturing company owns and operates a 683-km pipeline that was commissioned in 2005 on a common carrier pipeline principle, said another company executive.

Under the common carrier principle, which is currently applicable in natural gas pipelines, companies putting up infrastructure, have to invite interest from those who want to book capacity in the pipeline.

Another pipeline put up by a joint venture of Petronet VK Ltd to move products from the Reliance’s Jamnagar refinery and Essar’s Vadinar refinery was finding it tough to operate. Petronet VK Ltd is part of Petronet India Ltd.