The Hindu Business Line : Oil marketing cos irked over Reliance's LPG sale plan

New Delhi April 12 Oil marketing companies (OMCs) - Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation - have expressed apprehensions on the proposal by Reliance Industries Ltd (RIL) to sell liquefied petroleum gas (LPG) to these companies through an international competitive bidding route, as required for an export oriented unit (EOU) under the Exim Policy.

Oil industry sources told Business Line, "if we have to take it as deemed export, in that case it has to be through a international tendering process and if we adopt this process that there is no guarantee that RIL will emerge as the lowest supplier."

Currently, the oil companies are paying import parity price to RIL for LPG from Jamnagar refinery. The private sector refiner has now sought export parity price.

This request of RIL comes in the backdrop of its Jamnagar refinery being converted into an EOU. The OMCs were asked by the Petroleum Ministry to study the implications of purchasing LPG from RIL's Jamnagar refinery under the new dispensation.

The Ministry has asked the oil companies to look into the impact following a letter from RIL seeking permission to sell LPG to PSUs using international competitive bidding route. The industry is studying the impact and would submit the report to the Ministry, the sources said.

Deemed export status

Reliance currently exports over 70 per cent of its products. It has also sought grant of deemed export status under the Exim Policy for net foreign exchange purposes. Although this will not result in any revenue implications, the company has asked the oil PSUs to get the proposal examined by the tax and Exim Policy experts and advise the Ministry on the implications of this move on oil companies, Government revenues and also RIL.

Deemed exports refer to those transactions, which substitute for imports and under which the goods supplied do not leave the country and the payment is received either in Indian rupees or in free foreign exchange. The benefits of deemed exports are available only if supplies are made through the international competitive bidding route. LPG, as on today, is canalised for exports as it is being sold in the domestic market as a subsidised product. In order to avoid un-interrupted supply of LPG to the domestic consumers, the Government has banned exports of LPG by the refiners.

The country needs over 10 million tonne of LPG per annum, which is met through domestic production and imports. RIL's production accounts for over one-fourth of the country's total LPG production. Reliance's Jamnagar refinery is the country's biggest and produces over 2.5 mt of LPG. Domestic LPG production stood at close to 7 mt, and the rest is imported.

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