Railways seek pvt hand in storage facilities

To clear the way for the private sector to bag a substantial portion of its annual contract for 2 million kilolitres of diesel, Indian Railways plans to end the public sector stranglehold over the storage facilities.

It has proposed to take over the 20 railway container depots (RCD), used for storing diesel, from the public sector oil companies. Control of storage facilities is an-important pre-requisite for supplying diesel to the Railways.

At present, nearly 99.5 per cent of the diesel is supplied by the public sector.

Railway officials told Business Standard that the Railway board was scheduled to meet on Wednesday to decide on the matter as the public sector companies were resisting the transfer of the RCDs saying they had invested heavily in the depots.

RCDs are constructed on railway land with oil companies investing on pumps and tanks. Besides getting land next to the railway network, new players will need to spend more than Rs 2 crore on every new RCD.

"We want to give all the players a level-playing field since it is not possible to supply diesel to the Railways without providing storage facility," said a senior railway official.

This year, apart from Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum, Reliance Industries Ltd (RIL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) were supplying diesel to the Railways.

There are more than 200 RCDs, with varying capacity, across the railway network. A majority of these are under IndianOil control.

In 2005, the Railways had awarded RIL the contract to supply diesel through 20 RCDs and MRPL (two RCDs). Indian-Oil controlled 14 of these RCDs. With PSU oil companies having control over only five RCDs, the new entrants are finding it difficult to supply diesel.

A senior IndianOil executive said the issue was "tenancy-related" and wanted it to be amicably resolved as the Railways was a precious customer. The Railways tender for supply of diesel is among the largest for any refinery.

Railways tender guidelines provided that if an RCD was used by an oil company which had not invested in it, the company would have to pay user charges based on a formula.

Oil companies, which had invested in the RCD, were not required to pay any user charges. A similar problem had emerged in the case of aviation turbine fuel (ATF). The new players wanted to supply ATF to airlines without investing in the creation of storage facilities.

INVITING A PRIVATE HAND

There are more than 200 railway container depots across the railway network, majority of which are under IndianOil control

Railways has proposed to take over the 20 depots, used for storing diesel, from the public sector oil firms

Besides getting land next to the railway network, new players will need to spend more than Rs 2 crore on every new depots

This year, IOC, HPCL and BPCL, RIL and MRPL have been supplying diesel to the Railways