Tuesday, February 10, 2009

RIL wants govt to free retail oil prices

What do you think will happen now that Reliance is losing??

New Delhi: It’s a double whammy for Mukesh Ambani-controlled Reliance Industries Ltd. While demand for petroproducts is falling overseas due to global recession, the company’s mainstay refinery in Jamnagar is set to lose its export-oriented unit (EoU) status entailing tax incentives next month as the term expires.
“India has surplus refining capacity ... and some of them converted their plants into EoU and SEZ (special economic zone) status ... today they are having difficulty in selling in export market so they want to sell (fuel) in domestic market,” Planning Commission member (energy) Surya P Sethi told a brainstorming on deregulation of domestic fuel prices organised by Observer Research Foundation on Monday. Sethi did not identify Reliance by name.
Reliance had shut its chain of around 1,500 petrol pumps once domestic retail operations became unprofitable in the face of artificially low prices set by the government for fuels being sold by the state-run marketers during crude’s high run. While the government compensated its firms through bankable IoUs, Reliance did not enjoy that cushion and sought refuge in export status for its 33-million-tonne Jamnagar refinery.
Restarting domestic sales will remain an uncertain proposition unless the government let go of controls on retail prices. Any profit Reliance makes on motor fuels at prevailing retail and crude prices will evaporate the moment there is any upswing in global oil, which will force the government suppress prices artificially to avoid taking the politically unpalatable step of raising prices.
No wonder, Reliance refinery business head P Raghavendran made a strong pitch for deregulation. “We have no escaping (from freeing petrol and diesel pricing) ... the rest of the world is allowing (international crude oil) prices to get reflected in retail prices ...You have to let it (international rates) pass on to the consumers.”
ORF’s Ashok Dhar, a former Reliance executive, said allowing global trends to reflect in domestic pricing would result in petrol rates being further lowered by Rs 1.58 a litre and diesel by Rs 2.93 per litre in Delhi.
The political establishment’s opposition to fuel price deregulation was articulated by CPM’s Dipankar Mukherjee. “You cannot leave it to the market to decide,” he said and wanted retail prices to reflect cost of crude, refining and marketing expense.

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