Private refiners compete with state firms to sell diesel to railways

NEW DELHI (Reuters) - Private refiners Reliance Industries Ltd and Essar Oil Ltd are competing with state refiners to sell diesel to Indian Railways, sources at the state refiners said, after the federal government's control over diesel pricing ended last year.

Indian Railways, the biggest client for diesel, consumes up to 2.5 million tonnes of the fuel each year.

Tenders for supplying diesel to the railways country-wide are yet to be finalised.

"Reliance has been short-listed for supplies at some locations but the supplies have not yet begun," petroleum secretary Saurabh Chandra said at an energy conference on Wednesday.

Reliance offered a discount of about 1,800 rupees ($29) a kilolitre to the Railways, he added.

A source at Indian Oil Corp Ltd, the country's biggest refiner, said the private refiner, along with state-owned ones, has been short-listed by the Railways for an annual fuel supply contact beginning April 1.

"It is now up to the zonal divisions, which supplier they choose for supplies of diesel depending on discount offered," the source said.

Till last year, the Railways received supplies from state refiners who have a nation-wide network and were entitled for compensation from the government for selling fuel at cheaper rates.

($1 = 61.343 rupees)

(Reporting by Nidhi Verma; Editing by Anupama Dwivedi)