The Hindu Business Line : Diesel for Railways: Discount maintained at last year's level

Diesel procurement
The discount level is same as what the Railways had got in 2006.
Oil firms had offered much lower level of discount (Rs 300/kilolitre) for 2007.
The Railways was able to maintain the same level of pricing for diesel by invoking a clause in last year's contract.

New Delhi, Jan. 19

The Indian Railways would get a discount of Rs 1,125.27 per kilolitre of high-speed diesel from oil marketing companies while procuring diesel this year, which is equal to the discount level of last year.

Oil marketing companies such as IOC, BPCL, HPCL and MRPL will offer the discount to the Railways over and above the rate at which they dispatch high-speed diesel to their retail outlets.

This level of discount is as per the Railways' recently firmed up annual contract for 2007 (calendar year).

The Railways has been able to maintain the same level of pricing for diesel by invoking a clause in last year's contract, which the Railways entered into with the oil marketing companies in mid-2006. The clause allowed the same rates to be extended for another year, explained official sources.

The Railways had to invoke this clause because when it invited bids from various companies for diesel supply this year, the companies had offered much lower levels of discounts — in the range of about Rs 300.

The discount for 2006 was higher by Rs 90 per kilolitre compared with the discount of Rs 1,035.27 per kilolitre in 2005. In 2004, the Railways used to source each kilolitre of fuel at a much lower discount of Rs 600. The Railways procures about two million kilolitres of high-speed diesel every year.

While IOC, BPCL and HPCL have agreed to provide diesel for the entire year at a discounted rate of Rs 1,125.27 per kilolitre, MRPL has agreed to sell diesel at a marginally higher discount, wherein it has offered to waive off the Central Sales Tax.

For procurement, the Railways enters into rate contracts with various oil marketing companies for the calendar year.

The rate is generally the same for all companies and when finalised, the Ministry informs all Zonal Railways of the agreed rate. Various Zonal Railways are free to procure diesel from various companies as and when the need arises.