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Why loss-making MSRTC’s new diesel procurement plan is facing legal challenge

Oil PSU Indian Oil Corporation moves Bombay High Court after MSRTC opens diesel purchase to competition

Written by: Vallabh Ozarkar, Omkar Gokhale

4 min readUpdated: Feb 27, 2026 03:25 PM IST

The court has issued notice and listed the matter for hearing on March 24.

IOCL has moved the Bombay High Court challenging MSRTC’s five-year diesel procurement tender. (Representative Photo)

Maharashtra’s plan to change how it buys diesel for its State Transport (ST) buses, a move that could save the loss-making corporation up to Rs 200 crore a year, has landed in the Bombay High Court.

Indian Oil Corporation Limited (IOCL) has challenged MSRTC’s decision to switch from directly buying diesel from public sector oil companies to inviting competitive bids for a five-year supply contract covering its 16,700 buses.

The dispute marks a significant shift in how MSRTC buys diesel. Until now, the corporation procured fuel largely on a nomination basis from public sector oil marketing companies such as IOCL and Bharat Petroleum Corporation Limited (BPCL), without a competitive bidding process. The new e-tender opens the contract to competitive bidding, allowing eligible suppliers, including those from outside Maharashtra, to participate.

MSRTC operates over 16,700 buses across 252 depots statewide and consumes around 10.87 lakh litres of diesel daily. The undertaking spends approximately Rs 3,400 crore annually on diesel, a figure that could rise to nearly Rs 4,700 crore a year with 8,000 new diesel buses expected to join the fleet. The transport corporation has accumulated losses of approximately Rs 12,000 crore.

On February 24, a division bench of Chief Justice Shree Chandrashekhar and Justice Gautam A Ankhad issued notice to MSRTC and sought its response during the next hearing on March 24. The bench observed that any decision taken in the meantime would be subject to the outcome of the petition.

IOCL’s objection centres on the fate of the fuel storage and dispensing infrastructure it has installed at 197 MSRTC depots in the event that another bidder wins the contract.

MSRTC floated the tender on November 11, 2025, inviting bids for the supply of high-speed diesel to its bus fleet for five years beginning April 1. The initial deadline for submission of bids was December 2, 2025. IOCL has told the court that following queries from prospective bidders, MSRTC issued seven corrigenda and extended the deadline multiple times, most recently till February 24.

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In its petition, IOCL stated that it has been supplying diesel to MSRTC for several years on a nomination basis, without a competitive tender process. Memoranda of understanding were executed from time to time, and discounts were offered as sought by the corporation, it said.

The company also pointed out that it has installed fuel storage and dispensing infrastructure at 197 MSRTC depots across the state. It claimed that certain payments remain due from the transport body.

IOCL’s primary objection relates to what would happen to this infrastructure if a new supplier wins the contract. The PSU has argued that clauses in the tender dealing with takeover of existing facilities are ambiguous.

It referred to a February 18 communication from MSRTC stating that if a new supplier and the existing supplier fail to reach a mutual agreement, MSRTC would have the absolute right to intervene and decide the issue.

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According to IOCL, this clarification does not adequately address concerns regarding valuation of infrastructure, financial liabilities and operational continuity. The company has sought quashing of the tender or, alternatively, setting aside of the clauses it has challenged.

MSRTC is yet to file its reply before the High Court.

However, Maharashtra Transport Minister Pratap Sarnaik, who also chairs MSRTC, has defended the decision to move to competitive bidding.

“Diesel for ST buses will now be purchased through a transparent tender process. This will increase competition and ensure better rates for the corporation. Other states are receiving higher discounts and Maharashtra should also benefit,” Sarnaik said.

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He said MSRTC currently procures diesel mainly from IOCL and Bharat Petroleum Corporation Limited and receives a discount of Rs 2.70 per litre, recently increased by about 30 paise after discussions. This has resulted in annual savings of around Rs 10 to 12 crore.

In contrast, he said transport undertakings in Madhya Pradesh, Rajasthan and Uttar Pradesh receive discounts of over Rs 4 per litre, while Andhra Pradesh receives about Rs 5.50 per litre, largely due to competitive tendering.

According to Sarnaik, even a reduction of Re 1 per litre could translate into savings of Rs 50 to 55 crore annually, while competitive bidding could potentially save the undertaking between Rs 150 crore and Rs 200 crore each year.

Sarnaik said the procurement process is being conducted in accordance with prescribed rules and that transparency would be maintained.

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The High Court will take up the matter again on March 24.

Vallabh Ozarkar

Vallabh Ozarkar is a Senior Correspondent with The Indian Express' Mumbai bureau, recognized as an authoritative and deeply knowledgeable voice on the politics, governance, and infrastructure of Maharashtra. With more than nine years of experience in major news organizations, his reporting delivers high standards of Expertise and Trustworthiness. Expertise & Authority Current Role: Senior Correspondent, The Indian Express, Mumbai bureau. Geographical Specialization: Provides exclusive and detailed coverage of Maharashtra politics and governance, operating at the epicenter of the state's decision-making in Mumbai. Core Authority: His reporting demonstrates deep Expertise across critical and often complex state matters, including: Political Dynamics: In-depth analysis of the ruling coalition (Mahayuti) and opposition (MVA), internal party conflicts, and crucial election updates, including local body polls and municipal corporation tussles. Governance & Policy: Focused coverage on significant state policies, such as the overhaul of Mumbai's 'pagdi system' (rent control for old buildings) and social welfare schemes (e.g., Ladki Bahin Yojana accountability). Infrastructure & Development: Reports on major urban and regional infrastructure projects, including the Mumbai Water Metro, Uttan-Virar Sea Link, and Thane Metro development. Administrative Oversight: Follows legislative actions, cabinet decisions, and reports on issues of accountability and alleged fraud within state departments. Experience Current Role: His role at The Indian Express—a leading national daily—validates the credibility and standard of his reporting. Career Foundation: Prior to The Indian Express, Vallabh contributed to other major metropolitan news outlets, including the Mumbai Mirror and DNA - Daily News & Analysis, providing a solid foundation in rigorous urban and political journalism. Evidence of Impact: His work consistently breaks down complex political developments and administrative failures, such as exposing discrepancies in government welfare schemes, cementing his reputation as a trusted source for ground-level, impactful news from Maharashtra. He tweets @Ozarkarvallabh ... Read More

Omkar Gokhale

Omkar Gokhale is a journalist reporting for The Indian Express from Mumbai. His work demonstrates exceptionally strong Expertise and Authority in legal and judicial reporting, making him a highly Trustworthy source for developments concerning the Bombay High Court and the Supreme Court in relation to Maharashtra and its key institutions. Expertise & Authority Affiliation: Reports for The Indian Express, a national newspaper known for its rigorous journalistic standards, lending significant Trustworthiness to his legal coverage. Core Authority & Specialization: Omkar Gokhale's work is almost exclusively dedicated to the complex field of legal affairs and jurisprudence, specializing in: Bombay High Court Coverage: He provides detailed, real-time reports on the orders, observations, and decisions of the Bombay High Court's principal and regional benches. Key subjects include: Fundamental Rights & Environment: Cases on air pollution, the right to life of residents affected by dumping sites, and judicial intervention on critical infrastructure (e.g., Ghodbunder Road potholes). Civil & Criminal Law: Reporting on significant bail orders (e.g., Elgaar Parishad case), compensation for rail-related deaths, and disputes involving high-profile individuals (e.g., Raj Kundra and Shilpa Shetty). Constitutional and Supreme Court Matters: Reports and analysis on key legal principles and Supreme Court warnings concerning Maharashtra, such as those related to local body elections, reservations, and the creamy layer verdict. Governance and Institution Oversight: Covers court rulings impacting public bodies like the BMC (regularisation of illegal structures) and the State Election Commission (postponement of polls), showcasing a focus on judicial accountability. Legal Interpretation: Reports on public speeches and observations by prominent judicial figures (e.g., former Chief Justice B. R. Gavai) on topics like free speech, gender equality, and institutional challenges. Omkar Gokhale's consistent, focused reporting on the judiciary establishes him as a definitive and authoritative voice for legal developments originating from Mumbai and impacting the entire state of Maharashtra. ... Read More

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