Government nominees on the board of the Indian Oil Corporation (IOC) have strongly objected to the proposal that the corporation market downstream products from the Reliance and Essar refineries.
According to the government directors, the proposal would be against the spirit of deregulation in the petroleum sector as it could lead to a monopoly on marketing of petroleum products for IOC.
The directors also argue that as per the tentative tieup proposal mooted by the two private sector refiners, the corporation would not be adequately compensated for the use of its infrastructure by the two refining companies.
The directors have suggested that the marketing of petroleum products worth Rs 30,000 crore from the two private sector refineries should be undertaken by all the four public sector oil marketing companies.
The distribution of the products among these public sector undertakings should be decided by the Oil Coordination Committee (OCC) as per the norms laid down under the supply plan management and the oil economy budget. Reliance Petroleum is in the process of setting up the world's largest single stream grassroot polymers and fibre intermediates refinery at Jamnagar in Gujarat. The Rs 18,000-crore plant having an 18 million tonnes capacity, is expected to go on stream next year.
Essar Oil Limited is setting up a 10.5 million tonne refinery, also at Jamnagar. The refinery is scheduled for completion in the year 2000.
IOC, which is an industry leader with a 55 per cent market share, was earlier keen on the tie-up with the two refiners to ensure as much product availability as possible. It was planned that as IOC's own production capacity at a time when the two refineries come up would be of the order of around 30-35 per cent, the proposed tie-up with Reliance and Essar would ensure product availability and that its market share would remain at 55 per cent. On the other hand, both Reliance and Essar are heavy investments in building infrastructure and would also lose out on gestation period.
