Reliance seeks international price for LPG from PSUs

Reliance Industries Ltd (RIL), which recently converted its existing 33-million-tonnes-a-year Jamnagar refinery in Gujarat into an export house, has sought international price for LPG (liquefied petroleum gas) it sells to public sector companies.

Reliance sells most of the 2.3-million-tonnes-a-year LPG it produces at Jamnagar, as public sector refiners fall short in producing the cooking fuel. However, RIL currently gets a price lower than the imported price of LPG.

"We would request you to allow us to supply LPG to the PSU system under the International Competitive Bidding procedure as required under the export-import policy," the company wrote to Petroleum Secretary M S Srinivasan on March 30.

International bidding would imply that Indian Oil, Bharat Petroleum and Hindustan Petroleum""who have not been allowed to price LPG, kerosene, petrol and diesel in line with rise in cost""will have to pay Reliance a price close to the cost of importing the fuel.

"We have just converted our existing refinery at Jamnagar into an EOU (Export Oriented Unit)," Reliance wrote, while also seeking grant of deemed export status for such supplies.

An EOU status entitles Jamnagar refinery exemption from 5 per cent import duty on crude oil. RIL's subsidiary Reliance Petroleum is building another export-oriented 29 million tonnes a year refinery adjacent to this unit by end-2008.

Jamnagar refinery exported 17.84 million tonnes of oil products worth $10.3 billion in 2006-07, as against 10.84 million tons products export for $5.5 billion in the previous year.

Reliance said it had taken the step to convert Jamnagar refinery into an EOU to integrate itself with global markets.

"Several refinery expansions have been commissioned over the past year and the domestic industry now continues to be in surplus with respect to demand in transportation fuels and hence smooth supplies of transportation fuels will continue to Indian consumers despite conversion of our refinery into an EOU," the letter said.

India has 18 refineries with a capacity of 133 million tonnes per annum. At the end of 2007, the refining capacity is expected to reach 149 million tonnes while the domestic demand is around 144 million tonnes only.

As per the Draft 11th Plan Report, the country is expecting a huge exportable surplus of all petroleum products, except LPG.

In 2007-08, the country will have 26.88 million tonnes of exportable surplus, which will reach 86.54 million tonnes by 2011-12.

With PSUs planning major expansions in capacity, RIL sees no scope for selling products in the domestic market and so, it is targeting exports.

"We realise our Jamnagar refinery supplies substantial quantity of LPG to Indian consumers. As a part of our national duty, we would like to continue to supply LPG to domestic markets so that subsidised products such as LPG can be catered to the Indian consumers on an uninterrupted basis," Reliance wrote.