Oil PSUs to meet on Reliance retail deal

The three state-owned oil companies "" Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum "" have convened a joint meeting on November 14 to take up the issue of marketing Reliance Industries' petroleum products through their 19,000 retail outlets after March 2004.

This comes in the wake of Reliance seeking a two-year extension of its marketing agreements with the state-owned oil companies on a take-or-pay basis. The current agreement ends on March 31, 2004.

The three oil companies together market about 13 million tonnes of Reliance's products, as it does not yet have any presence in the retail market.

The oil PSUs, sources confirmed, are not keen on continuing with the current take-or-pay contract (i.e., paying for the full quantity contracted, even though it may not have been lifted).

Senior IOC officials said: "These are preliminary discussions and we will have to consider several issues before taking a firm decision. We have to work on new numbers for product offtake as we have expanded our refining capacities at various refineries. Besides, the cost of the product will also be an important criteria for marketing them."

Reliance currently gets import-parity price for its products, but other local or foreign oil companies are free to sell petroleum products at a lower price to the oil companies in a de-regulated environment.

A senior BPCL official said: "We will not enter into a take-or-pay agreement. We may at best enter into a tonne-to-tonne (need to market basis) agreement with Reliance."

IOC also has another 5-year contract with Reliance till 2008-09, which says it will lift RIL's products on a demand-basis, unlike the take-or-pay clause in the current contract, and will also pay a competitive price for Reliance's products.

The extension of agreement sought by Reliance will help it sell its product till such time it sets up its entire retail network.

Reliance has received the government's nod to set up 5,800 retail outlets across the country.