Financial Daily from THE HINDU group of publications
Monday, May 27, 2002
Corporate - New Projects
Bid to link Jamnagar with major markets: Reliance group seeks nod for five product pipelines
Balaji C. Mouli
NEW DELHI, May 26
THE Reliance group has sought the Government's approval to set up five product pipelines connecting its Jamnagar refinery with various parts of the country over a timeframe of three years.
These include a pipeline connecting Jamnagar to Delhi, Goa to Hyderabad through Sholapur, Delhi to Patiala and one connecting Chennai to Bangalore.
Signalling an aggressive bid to home in on markets for its 27-million tonne refinery at Jamnagar, Reliance has said in its proposal that the pipelines will have a spare capacity ranging from 33 to 50 per cent of the capacity and are aimed at serving other consumers on a `common carrier' basis.
Under this scheme, Reliance will have the right of first use for its own requirement. Usage of the remaining capacity by the other market players will be determined by the proposed regulatory board for the oil and gas sector.
With regard to the tariff, Reliance is agreeable to the regulator fixing the tariffs as and when the regulatory agency is set up.
The proposal of Reliance should be viewed in the context of the pace of setting up of the regulatory board.
Since the Petroleum Regulatory Board Bill has been referred to the Standing Committee of Parliament, it will take anywhere between six months and one year for the regulatory board to be set up.
In the absence of the regulator, the Government is in a quandary on the process to be adopted to give approvals for setting up pipelines.
In the Petroleum Regulatory Board Bill, there is an elaborate process for according such approvals. This includes soliciting suggestions and objections within a specified timeframe from all entities to be affected by the setting up of the pipeline. The regulator also has the powers to declare any pipeline as a common carrier.
Non- company-specific product pipeline projects involving participation of several corporates such as Reliance, Essar, Indian Oil Corporation have floundered in the past owing to conflict of interest.
According to analysts, it will be interesting to watch the Government's response to Reliance's proposal, given the latter's time-bound implementation schedule for capital investment in the pipelines business.
Also, the Government's ability to implement the economic principles guiding the regulator as laid down in the Bill till such time it is set up remains to be seen.
In regard to processing applications related to the pipelines business, Section 20(4) of the Bill states that the board will be guided by the objectives of promoting competition in marketing among entities, avoiding infructuous investment, etc.
Reliance's application in the pipelines business complements its aggressive posture with regard to setting up retail outlets across the country.
Sometime ago, the company had made an application to the Government, announcing its intention to set up 5,849 retail outlets to sell 10 million tonnes of diesel and 2.4 million tonnes of petrol.
This, application, did not, however, specify any implementation timeframe as compared to the pipelines application which specified a time period of three years.
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