Reliance Petroleum starts petrol exports - Views on News from Equitymaster

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Reliance Petroleum starts petrol exports

Feb 8, 2000

Reliance Petroleum (RPL) has tied up with Shell for the export of 66,000 tonnes of petrol. RPL will lose almost Rs 200 million as compared to what it could it would have made if the petrol was sold domestically. The company however said that the advanced licensing benefits as well as the facility for duty free crude imports would more than make up for the loss. Petrol is one of the five products whose prices are controlled (the others being LPG, diesel, air turbine fuel, kerosene) and attracts a 30% import duty and this is one of the reasons for good margins in the domestic market.

Domestic prices of petrol are almost 15% higher than the international prices. However the country has headed into a surplus situation with the total production of petrol expected to touch 8.80 million tonnes in the current year as against the total consumption of 6.40 million tonnes.

The private sector refiners have been lobbying that export losses be borne by the oil pool account which would thereafter get transferred to the individual companies in the proportion of petrol that each company produces. However the Rs 200 million loss would be borne by Reliance itself.

Obviously the integrated companies will push their in house production through their marketing network first rather than those of their private sector brethren if the oil pool account were not to bear the loss. If on the contrary, the oil pool were to bear the export losses the loss that each company would be allocated would depend on the proportion of petrol produced by individual companies.

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