The government has allowed entities that do not have the rights to refine or market petroleum products to book capacity in product pipelines.
It has also made it mandatory for companies that have obtained permission to lay product pipelines to complete the projects within 36 months of getting the right of user.
Clearance from the ministry of petroleum and natural gas would be required in case there is a change of ownership of the pipeline implementing company.
However, the permission is required only if the company is a subsidiary company and has been granted the RoU on the basis of its parent company's balance sheet.
The owner or proposer of the product pipeline will also be required to furnish an irrevocable bank guarantee amounting to 2 per cent of the project cost or Rs 200,000 per kilometre of pipeline proposed, whichever is higher, after the ROU has been granted.
Another supplementary policy guideline pertains to the additional capacity which the owner of a pipeline is required to put in, called common carrier capacity, while constructing the pipeline, even if there are no additional takers.
The government has clarified that should any other party seek transportation through the common carrier capacity, the owner will vacate and make it available up to the designated level immediately.
This proposal may not find favour with the petroleum companies since the additional pipeline capacity will be laid by them out of their own funds in the event of no company becoming part of the project initially, said a corporate source.
Senior officials told Business Standard that an RoU is liable to be cancelled and the bank guarantee invoked if the RoU does not translate into actual construction.
Pipeline projects will be required to be commissioned within the time period specified in the approval letter, which will have an outer limit of 36 months from the date of sanction.
The RoU acquisition must commence after the execution of the bank guarantee, which has to be deposited within 30 days of sanctioning, failing which the permit will stand withdrawn.
Rules for laying it down
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