The Export Oriented Unit status of Reliance Industries' Jamnagar refinery in Gujarat has ended, allowing the company to sell petrol and diesel locally including through its 1,432 now-closed petrol pumps.
"The EoU status of the 33 million tons a year refinery has ended this week," an industry official said.
Jamnagar refinery, which was commissioned in July 1999 and now known as J-1, was converted into an EoU with effect from April 16, 2007. Reliance Petroleum, a unit of the company, in December 2008 commissioned a new only-for-exports refinery J-2, adjacent to the old unit.
The official said Reliance will continue to export most of the fuel from J-1 but will also sell petrol and diesel in domestic market. It may sell 2.5-3 million tonnes of diesel to public sector fuel retailers - Indian Oil, Bharat Petroleum and Hindustan Petroleum - to meet the deficit they are expected to have in 2009-10.
Also, it may reopen the the 1,432 petrol pumps it had shut last year as it could not compete with subsidised fuel sold by public sector retailers.
Though the margins on petrol and diesel had turned positive with the fall in international oil prices since October 2008, Reliance still could not sell fuel from J-1 through the petrol pumps as the EoU status made it prohobitive for the company to sell fuel locally.
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The EoU status gave the company the benefit of duty-free import of raw material crude oil and tax exemptions in exchange for exporting at least two-third of the products.
As per the law, if an EoU was to sell fuel locally, double customs and excise duties were levied to make petrol and diesel dearer by Rs 9-10 a litre.
When it was commissioned in July 1999, Reliance availed of special tax rebates, including income-tax holiday, sales tax and excise-duty concessions, all of which had expired by 2007.
It converted the same refinery into an EOU since selling products like petrol and diesel in the domestic market is uneconomical due to subsidies.