The Hindu Business Line : ‘Essar selling petrol to Reliance’

Sector alliance
Essar selling to Reliance from 3 different locations.
No product swapping arrangement: direct buy/sell.
RTP rates are Rs 2/litre higher than retail selling price.

Richa Mishra

New Delhi, Aug. 7 Interesting alliances are being seen in the petroleum sector. The most recent is Essar Oil Ltd (EOL) selling petrol (motor spirit) from its Vadinar Refinery in Gujarat to Reliance Industries Ltd (RIL). Essar Oil has till date sold close to 5,000 tonnes of petrol to Reliance.

Sources told Business Line that Essar is selling petrol to Reliance at three different locations. Essar started selling the petroleum product to Reliance from Jamnagar in May, followed by Rajasthan in June and subsequently from JN P ort from July end. It is also selling a small quantity to Shell.

Pricing

The product is being sold to Reliance at refinery transfer price (RTP) or trade parity price as it is called now, sources said. Declining to give the exact pricing, the source indicated that RTP rates change every 15 days and that it is Rs 2 per litre higher than the retail selling price (RSP) of the product.

For instance, if the RSP is Rs 20.50 per litre, the price at which Essar will sell to Reliance will be Rs 22.50 per litre. “The retail selling price is lower than the price at which Essar or Reliance is buying the product,” sources explained.

This anomaly in pricing has had an adverse impact on the retail business of private sector players, as they are not extended any subsidies like the PSU marketing companies for selling petroleum products below the cost price, he added.

Essar has not got into product swapping arrangement with others and is directly buying or selling, sources added. Essar is also exporting its products to Europe and other countries.

Vadinar refinery

It had commissioned the refinery at Vadinar in November last year. The plant started its trial production with a capacity of 7.5 million tonnes per annum of crude which is to gradually go up to 10.5 million tonnes per annum by October.

The refinery has the capability to produce petrol and diesel suitable for use in India as well as advanced international markets. The company is currently producing LPG, naphtha, light diesel oil, aviation turbine fuel, kerosene, and petrol.

Stating that the production from the refinery is stabilising now, sources said that in another two months the exact quantity of what is being produced will be known.

Sourcing

Essar is also using the petrol produced from its refinery for its own retail outlets, with some sourcing from Reliance in the East. The company is sourcing high-speed diesel (HSD) from MRPL, NRL, Reliance, and is also importing the same quantity. The company currently has 1,200 retail outlets, and 450 are at different stages of construction.