Mukesh Ambani-run Reliance Industries [Get Quote] has offered to sell diesel from its refinery at Jamnagar in Gujarat to state retailers provided the gvernment removes double taxation, Oil Secretary R S Pandey said on Monday.

Reliance has converted Jamnagar into an only-for-exports unit, thereby getting tax incentives like exemption from payment of income tax and duty free import of raw material.

An export oriented unit is discouraged from selling products in domestic market through levy of double taxation.

"They have offered to sell whatever quantity of diesel the oil marketing companies need but want the taxation issue to be resolved. We are looking into it," Pandey, who met Mukesh Ambani at his office this morning, said.

Indian Oil [Get Quote], Bharat Petroleum and Hindustan Petroleum will have to pay Rs 9.51 a litre more in taxes on petrol and Rs 2.85 per litre on diesel if they buy fuel from Jamnagar.

Sales from an EOU or a unit in special economic zone are treated as imports and are first levied customs duty, then additional customs duty and then CVD.

A three per cent cess is levied on the aggregate of these. On top of this, additional excise duty in charged and a three per cent cess is levied on aggregate of these.

Multiple cess is not levied on direct imports.

Pandey said the ministry was looking into the issue and will at appropriate time take up the issue with the ministries of commerce and finance.

The three state-run retailers are faced with a whopping 16.9 per cent demand growth in diesel and would need to import about five million tons in 2008-09.

Buying from Jamnagar would give them the freight advantage provided the double taxation is removed. Taxes are to be paid by buyers and so the state-run firms find it unattractive to buy fuel from Reliance.