Rivals Oppose Ioc Stake In Madras, Cochin Refineries

The proposed sale of government holding in Madras Refineries Ltd (MRL) and Cochin Refineries Ltd (CRL) to Indian Oil Corporation (IOC) is likely to come under cloud in the face of opposition from the other two refining majors: Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

Petroleum ministry sources say BPCL and HPCL have long been lobbying for taking over one of the two refineries. In the early 1990s, when the government had moved forward on reforms in the oil sector, there was a proposal to merge CRL with BPCL, but it never took off.

More recently, the Arjun Sengupta Committee, set up to formulate a package of reforms to nurse the oil sector economy back to health, suggested that the government offload 50 per cent of its stake in MRL and CRL in favour of IOC.

 

This has upset BPCL and HPCL, which had evinced interest in the two companies. BPCL sources said the recommendations did not make sense as they would stifle competition by further strengthening a petroleum giant.

On one hand, they talk of competition. On the other hand, this proposed merger will create a giant. Suppose all their refineries shut down, what will happen to petroleum products supply in this country, asked BPCL sources.

A seven-member team under former CRL chairman J Jayaraman, appointed by the government to examine the issue of merging CRL with IOC, had also talked to HPCL on this issue, though no details are available.

Sources say the Arjun Sengupta report would only increase lobbying by HPCL and BPCL.

The proposed sale, if approved, will widen the distance between BPCL, HPCL and IOC. With the addition of MRLs and CRLs capacities 14 million tonnes IOC will end up with a capacity of nearly 50 million tonnes after its ongoing expansions are completed. It will thus contribute to more than half of Indias petroleum product consumption by 2001-2002, when the countrys consumption is projected to touch 110 million tonnes.

IOC now has a capacity of 24 million tonnes and is adding another 12 million tonnes by the year 2000. BPCL has a capacity of 6 million tonnes and is adding 13 million tonnes to it. HPCL has a capacity of 9 million tonnes and is increasing it by over 20 million tonnes.