RIL unwilling to extend discounts to OMCs

Richa Mishra

Unresolved issue

While calculating

discount, MRPL wants only crude used for domestic purposes to be considered

The Petroleum

Ministry has already requested the private and PSU standalone refiners to extend discounts on petroleum products sold by them to retailers

New Delhi, Aug 1

With Reliance Industries Ltd unwilling to extend any discounts to oil marketing companies (OMCs), the public sector enterprise Mangalore Refinery and Petrochemicals Ltd (MRPL) may find that its demand for a change in the process of discount calculation may not be accepted.

The Petroleum Ministry had also decided not to get into the picture directly and has asked MRPL to discuss the issue with OMCs IOC, IBP Co, Hindustan Petroleum Corporation, Bharat Petroleum Corporation as it was a matter to be decided between two commercial entities.

Unresolved issues

Before considering any discounts, MRPL wanted certain issues to be resolved. Sources told

Business Line

that discounts are currently calculated on the basis of crude throughput. MRPL's view was that crude used for exports should be left out and only that meant for the domestic market should be considered for discount purposes. However, indications are that there may not be any change in discount calculation mechanism.

Refuses discounts

RIL on the other hand has declined to offer any discounts on sale of petroleum products - liquefied petroleum gas and kerosene - to State-owned retailers during the current fiscal. To partially offset the heavy under-realisation suffered by the retailing companies due to surge in international crude prices, the Petroleum Ministry has requested the private and PSU standalone refiners such as RIL and MRPL to extend discounts on the petroleum products sold by them to retailers.

Hoping for discounts

The marketing companies have been holding separate meetings with the refiners to negotiate discounts. The Government is expecting discounts of Rs 2,500-Rs 3,000 crore, similar to those last year, from the private and standalone refiners such as RIL, MRPL, Chennai Petroleum and Kochi Refineries. Apart from discounts, the Government is expecting Rs 24,000 crore of subsidy sharing by companies such as ONGC, Oil India, and GAIL.

Last year, RIL had extended a discount of Rs 750 crore, MRPL gave close to Rs 290 crore, CPCL gave approximately Rs 240 crore, KRL gave about Rs 200 crore and the rest came from others. Asked what is the discount the companies are expecting from the refiners this year, sources said it would depend on the quantity of the products purchased.

Network plans

Apart from the discount issue, at a recent meeting between Petroleum Ministry and MRPL, the company's retail outlet network plans were also discussed. According to sources, the Ministry has clearly indicated that the company should not expect to be treated on par with the marketing companies as far as burden sharing was concerned. The retail companies are expected to suffer over Rs 73,500 crore under-realisation due to selling their products below the cost price.

Some of the other issues discussed at the meeting included the refinery expansion and petrochemicals project of MRPL. The Ministry gave its go ahead to MRPL on refinery expansion plans and the petrochemicals project.

(This article was published in the Business Line print edition dated August 2, 2006)
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