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Thursday, Jan 10, 2002

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RPL, IOC mull status quo

Balaji C. Mouli


RELIANCE Petroleum Ltd (RPL) and Indian Oil Corporation (IOC) are actively considering settling for a lower take-or-pay offtake of around 12-13 million tonnes annually from the former's refinery in the post-Administered Pricing Mechanism (APM) era, according to industry sources.

This is one of the solutions being mooted to resolve the stand-off on the marketing rights agreement between IOC and RPL, where the private refiner has been insisting on a take-or-pay offtake of 15 million tonnes of products per annum. IOC has, however, refused to accept these terms and sought review of the contract.

As per the proposal being discussed currently, IOC and RPL are planning to retain the existing commercial arrangement on offtake from the RPL refinery for a period of two years in the post-APM era, beginning April 1, 2002. This would mean both the parties agreeing to an offtake of 12-13 million tonnes, instead of 15 million tonnes as envisaged in the original agreement. The contract, signed in 1999, is valid up to 2009.

At present, IOC buys around 12.6 million tonnes from RPL and distributes some of the products through Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). For instance, BPCL's offtake is around 1 million tonne from IOC per annum.

As part of the initiative to end the current impasse, the Petroleum Ministry has called for a meeting of the marketing directors of the petro-marketing companies to ascertain their projected offtake from IOC over the next two years.

The stand-off on the marketing rights agreement is on account of the change in business environment coupled with depressed demand for the single largest refinery produce, diesel.

The Hydrocarbon Vision 2025 document, prepared and ratified by the Cabinet two years after the signing of the contract in 1999, significantly eased entry into the petro-marketing business in the post-APM era.

Under the contract, IOC is committed to pick up 8.5 million tonnes of products while the planned joint venture between RPL and IOC is expected to lift another 6.5 million tonnes. The contract further states that in case the joint venture does not materialise, IOC would be required to lift the entire 15 million tonnes.

IOC and RPL are approaching the stand-off with the objective of first resolving it in the short-term, and later resolving the fate of the contract for its entire period.

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RPL, IOC mull status quo

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