Jamnagar unit may supply to domestic mkt

Reliance Petroleum may have to provide for domestic markets if there is a supply gap. The company was developing the refinery to target the export market.

"If there is a domestic shortage of certain products after the refinery is commissioned, we will ask Reliance Petroleum to supply to the domestic area as well," a petroleum ministry official said. The refinery is expected to go on stream in 2008.

The official said if there were shortage in the domestic market it made sense to buy from domestic refineries rather than resorting to imports.

Officials added that the ministry might ask the finance ministry to relax rules in case of commodities in short supply, especially if they were meant for public distribution.

"At present, India is self-sufficient in kerosene but imports LPG. About 30 per cent of the total LPG requirement is being imported," the official said. Prices of commodities like kerosene and LPG are regulated.

Being a refinery in a special economic zone makes Reliance Petroleum eligible for benefits like exemption from Customs duty on imports, service tax and sales tax. However, if it sells products in the domestic territory from the special economic zone, it will have to pay the excise duty on it.

Not just Reliance, even the Mangalore refinery of Oil and Natural Gas Corporation in the special economic zone will have to sell in the domestic tariff area, if needed.

According to the red-herring prospectus of the ongoing public offer of Reliance Petroleum for funding the Rs 27,000-crore Jamnagar refinery, the company did not expect the government to invoke the Essential Commodities Act against it.

The Essential Commodities Act allows the government to regulate supply and distribution of essential commodities that include petrol and petroleum products. The prospectus also warns that timing of any new legislation, including appointment of a regulator could have an adverse impact on its business.

Reliance Industry Executive Director Nikhil Meswani at the road show of the Reliance Petroleum IPO had said the Jamnagar refinery was targeting export markets especially in the US and Europe.