Insurance
Health Insurance: National Insurance Withdraws 11 Products

Will policyholders suffer?

 

National Insurance is withdrawing 11 products from 1...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Are Expense Ratios of Indian Funds Too High?

Indian fund houses charge 100%-150% more than those in the US

 

Mutual fund costs in...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
OilMin planning to stop RIL from selling crude to Jamnagar refinery?

The Oil Ministry is considering directing RIL to stop sale to its Jamnagar refinery and instead sell crude oil from its KG-D6 block to Chennai Petroleum Corp

 

India's Ministry of Petroleum & Natural Gas (OilMin) is considering ordering Reliance Industries Ltd (RIL) to stop selling KG-D6 crude oil to its Jamnagar refinery and instead sell it to Chennai Petroleum Corp Ltd (CPCL) at lower rates, say media reports.

 

The Production Sharing Contract (PSC) mandates producers to sell crude oil at the best available market rate so as to ensure highest profit petroleum and royalty to the government.

 

RIL, which sold crude oil from the MA oil field in the predominantly gas-rich KG-D6 block to CPCL during first five years of production on negotiated terms, floated a tender for sale of 2.5 million barrels of oil in 2014-15.

 

Jamnagar refinery of RIL won the tender as CPCL offered a pricing formula that was about $4-$5 per barrel less than the formula quoted by the private sector refiner.

 

The OilMin is now of the view that sale of crude oil is to be done on arms length basis and cannot be done to an affiliate, a senior ministry official said.

 

The Ministry believes RIL's Jamnagar refinery would not qualify for this bidding as per PSC provision and the company would have to go for the next option which in this case is CPCL. Also, RIL may go for a fresh tender for getting an arms length price.

 

The official said that in the interim period, the ministry is considering directing RIL to stop sale to its affiliate Jamnagar refinery and sell it to CPCL at the price quoted by it.

 

RIL however refuted this view saying that "there is no restriction in the PSC that the oil and gas cannot be sold to related party as long as an arms-length process is followed".

 

While higher price would give government more profit petroleum and royalty, CPCL being a subsidiary of IOC, does not pay any dividend to government on its profit.

 

"PSC obliges Contractor to sell at the market determined price to the benefit of all Parties. The sell at higher price to RIL Jamnagar refinery would entail additional profit petroleum and royalty. Petroleum Ministry has never questioned that the process followed is in violation of PSC," a company spokesperson said.

 

RIL said it earlier sold the crude oil and is now selling condensate to PSUs under similar process followed wherein RIL Jamnagar was not the highest bidder. "No question was raised as to the same bidding process," he said.

 

The ministry official said CPCL wanted the pricing mechanism to be reopened as it felt a premium of 2 per cent over widely traded Bonny Light crude oil, reflecting quality differential, was not justified.

 

The crude, CPCL felt, produced more naphtha and less of high value diesel, and so offered a price formula which was about $4-5 a barrel lower than the one offered by RIL.

 

The official said: "It appears that terms and conditions of the tender has been framed in such a manner that none other than RIL Jamnagar refinery could participate."

 

RIL spokesperson however refuted this saying that "having followed a robust transparent bidding process, the allegation that RIL has tailor-made the formula is only an after- thought.”

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)