The oil public sector undertakings are ordering heavy quantities of imported butane despite some quantity of the product available with indigenous manufacturers.
The indigenous butane is, in fact, available at Rs 4,000 a tonne less than the imported butane. The PSUs reluctance to lift indigenous butane is leading to a loss of Rs 1 crore a day to the exchequer, both by way of foreign exchange outgo as also the avoidable expenditure incurred on the handling of imported parcels. Butane is mixed with propane to produce liquefied petroleum gas .
For most of the past year, Reliance has been producing around 20,000 tonnes of butane every month at its petrochemical complex at Hazira. It is offering the produce to Indian Oil Corp, the canalising agency for petroleum imports, at around Rs 4,000 a tonne less than what the PSUs pay for imported butane, on the condition that the government lifts the entire quantity.
However, despite more than ten reminders so far, the government has not shown any interest in the deal. Meanwhile, Reliance is selling the butane to industrial buyers like the Tatas, as commercial fuel.
The government has been arguing that it is unable to purchase butane from indigenous sources because of a policy decision taken by the Cabinet after the controversial Kuo oil deal, according to which it cannot enter into any deal for the purchase of petroleum products where an Indian agent is involved.
However, Reliance has argued that this policy directive does not apply to it since the company is not an agent but a producer of butane.
It is learnt that Reliance has also offered to work out a price formula, based on the import parity price of butane, for its sale to oil PSUs. It is insisting on the PSUs picking up its entire production so that it does not have to look for other buyers.
Industry sources say that the oil PSUs should not have any difficulty in lifting the entire quantity of butane from Reliance since it will constitute merely 20 per cent of the countrys total imports of butane.
The PSUs will still have to import large quantities of butane to meet the countrys LPG needs.
The sources say that besides the price advantage, the lifting of butane from domestic sources will help ease congestion at Indian ports.
