Reliance Industries Ltd will sell 4.3 million tonnes of petroleum products from its 33 million tonnes Jamnagar refinery in Gujarat to public sector oil retailing companies in 2004-05.
RIL, which plans to build upto 500 petrol pumps every quarter to begin retailing of petrol and diesel in a big way, sold 11.3 million tonnes of LPG, kerosene, petrol and diesel to Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd during the current fiscal.
"They (Reliance) have agreed to supply us 4.3 million tonnes of products we need in 2004-05," a senior public sector oil firm official said in New Delhi.
RIL currently sells its output to state retailing firms under a contract that expires on March 31, 2004 and company chairman and managing director Mukesh Ambani had last week said his firm did not propose to extend the contract.
"We are not extending or renewing the contract as had been previously sought by Reliance. We propose to meet deficit (in PSU production) through purchases from Jamnagar," the official said, pointing out that IOC already has in place a five-year contract, beginning 2004, with RIL for sourcing products on need basis.
Sources said offtake from RIL would fall due to expansion of Mumbai refinery of BPCL and Chennai refinery of IOC and recognition of Mangalore refinery's full capacity.
RIL wanted PSUs to continue lifting 2003-04 volumes for at least another year for it to put up substantial retail network, but PSUs felt they would have to cut down on their production if Jamnagar product was to be accommodated.
Public sector oil firms, sources said, had put a condition to RIL to keep on hold its retail plans if it wanted them to lift the current volumes next fiscal.
RIL on its part threatened to stop LPG supplies, the mass cooking fuel that PSUs are facing shortage of. RIL, however, realised it could not carry on the threat as Jamnagar refinery had just 15,000 tonnes of LPG storage and exporting during lean season like summers would have been difficult.
"Reliance has agreed to supply us the deficit in 2004-05 and talks on additional quantities possible and at what price will continue," they said.
RIL's main concern is diesel, whose purchase the state firms plan to cut to just 1.3 million tonnes from the current 6.2 million tonnes.
Ambani had last week said: "When we roll out our full retail plan in the next 6-12 months, we expect to market at least between 75-80 per cent of our products (to our outlets)."
Sources said public sector oil companies plan to take just 0.3 million tonnes of petrol and kerosene each and 2.4 million tonnes of LPG from RIL's Jamnagar refinery next fiscal.
In the current fiscal, they are lifting 0.6 million tonnes of petrol from Jamnagar, 2.3 million tonnes of kerosene and 2.2 million tonnes of LPG.
Lower product offtake from RIL is mainly due to inclusion of the entire 9.69 million tonnes capacity of Mangalore Refinery and Petrochemicals Ltd in the industry logistics plan and expansion of BPCL's Mumbai refinery by 3 million tonnes to 12 million tonnes and Chennai refinery from 7.5 million tonnes to 10.5 million tonnes.
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