The Indian oil sector seems to be really hotting up for competition with Indian Oil Corporation, the country's largest state-owned oil major decided to match Reliance Industries discount offer for diesel.
Reliance Industries had offered diesel at a discount of Rs 1,040 per kilolitre to the price quoted by three state-owned oil companies -- IOC, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
N G Kannan, director marketing, IOC told newspersons here today that: "As per the purchase preference scheme, we (PSU oil companies) have been asked to match the Reliance's proposal. We are in the process of evaluating the proposal as our stake is almost 80 per cent of the railway's requirement."
Indian railways annually use two million tonnes of diesel and IOC supplies about 1.7 million tonnes of this fuel, he added. India consumes about 8 million tonnes of diesel directly to customers, of which 6 million is sold by IOC.
The Railways' diesel tender is important for the oil PSUs as they are now fighting with private sector oil companies.
However, IOC has already lock its bulk sales with Defence, three years with the Indian Navy and Air Force, one year with Indian army while it has signed a three-year contract with with Gujarat State Transport Corporation and Maharashtra state transport undertaking. However, it has lost a diesel tender in Chennai for state transport undertaking.
Rs 3610 crore hit: Meanwhile, IOC is expected to take a hit of Rs 3,610 crore (Rs 36.1 billion) in two months -- April and May 2005 -- on account of under recovery of prices of liquified petroleum gas and kerosene besides under realisation of prices on sale of petrol and diesel.
In 2004-05, IOC had additional burden of Rs 6,588 crore (Rs 65.88 billion) on under-recovery in LPG and SKO and Rs 1189 crore (Rs 11.89 billion) for under realisation of price of petrol and diesel.
Kannan was speaking at the sidelines of the company's performance highlights for 2004-05. When asked whether oil PSUs have decided to stop the sale of LPG and kerosene due to under recovery of prices, Kannan pointed out that "the oil companies were merely regulating and tightly monitoring distribution of LPG and kerosene from the dealers so that there is no diversion of the same for industrial purposes. In April, the growth of LPG sales has been only three per cent."
On IBP being merged with IOC, Kannan said that the company will continue with IBP Red and IBP brand while IBP's consumer and LPG division will be merged with IOC. "IOC's policy regarding LPG and consumer division are already being extended to IBP."
Regarding merger ratio, Kannan said it's a inter-ministerial note and we have yet to receive communication.
Meanwhile, IOC has chalked out a Rs 2,770 crore (Rs 27.7 billion) capital outlay on infrastructure in 2005-06. This includes Rs 1,125 crore (Rs 11.25 billion) expenditure on setting up retail outlets, Rs 1,012 crore (Rs 10.12 billion) on LPG, Rs 360 crore (Rs 3.6 billion) on its other operations and Rs 273 crore (Rs 2.73 billion) on other.
Kannan said: "IOC will add 1,000 new retail outlets and another 1,000 low cost retail outlests called Kisan Sewa Kendras. For these kendras we have signed a memorandum of understanding with ICICI."
As against the normal spent of Rs 30 lakh (Rs 3 million) on a regular petrol pumps, a KSK will be set up at a cost of Rs 400,000-500,000, he added. These kendras will also provide financing, insurance facilities to farmers, seeds and fertilisers and overall health and hygiene.
The corporation has earmarked Rs 1,012 crore (Rs 10.12 billion) for setting up two new LPG plants and intends to add 40 auto LPG stations. Besides, Rs 360 crore (Rs 3.6 billion) will be spent on new depots, additional tankage at Paradip and 10 other locations and automation of existing depots.
© 2025