Intensifying its attack against the Narendra Modi-led government over the Adani Group controversy, the Congress party on February 17 alleged that state-owned Indian Oil Corporation (IOC) was “being made to” import liquefied petroleum gas (LPG) from Adani Ports and SEZ’s Gangavaram Port, under an “unfavourable” take-or-pay contract.
In a take-or-pay contract, the buyer or off-taker is required to pay a charge even if it does not take delivery of the contracted goods or utilise the facility to the extent agreed under the deal.
What are the Congress party’s allegations on Adani and IOC?
In a statement addressed to Prime Minister Narendra Modi, Ramesh said, “Now we learn that IOC, which was earlier importing LPG via the government-run Visakhapatnam Port, is instead being made to use the neighbouring Gangavaram Port and that too via an unfavourable ‘take-or-pay’ contract. Do you view India’s public sector simply as a tool to enrich your cronies?”
Ramesh’s statement came close on the heels of Trinamool Congress Member of Parliament Mahua Moitra alleging a “scam” in the initial pact signed between IOC and Adani Ports for using the Gangavaram Port for importing LPG, preferring it over the Visakhapatnam Port.
Moitra had tweeted on February 15, tagging Petroleum Minister Hardeep Singh Puri, the Central Vigilance Commission, and the ports and shipping ministry. She tweeted the screengrab of a news report based on the December quarter earnings presentation of Adani Ports, in which the company had said, “MoU signed with IOCL for a take-or-pay contract at Gangavaram Port for building LPG handling facilities.”
IOC gave a detailed response to Moitra in a series of tweets the next day, in which it mentioned that it had only inked a non-binding MoU with Adani Ports and SEZ, and there was no take-or-pay liability or any binding agreement “as of now”, which many saw as a rejection by IOC of Adani Ports and SEZ’s claim.
Adani Ports and SEZ, as well as the conglomerate, has so far neither commented on the allegations nor on IOC’s response. The petroleum ministry, and the government at large, have not commented on the issue either.
Referring to IOC’s response to Moitra, Ramesh asked, “Did Adani Ports inadvertently reveal the game before it was finalised? Does the signing of an MoU not clearly indicate the direction in which IOC is being pushed? Does the fact that a take-or-pay contract was at all on the table not betray the fact that Adani was going to be made the primary port for the import of LPG rather than one of many, as IOC has stated?”
What has IOC said on the matter?
IOC, which is India’s largest refiner and fuel retailer and one of the biggest and most profitable Public Sector Undertakings, clarified that oil marketing companies (OMCs) do not invite tenders for hiring LPG import terminals, and instead take a call based on their evaluation of the facility’s infrastructure “for its suitability for catering to the nearest market at a reasonable cost”.
“IOC enters into agreements with various ports on a regular basis to enhance its capability to supply LPG to every nook and corner of the country,” IOC said. It also rejected the claim that it was moving business away from government-owned Visakhapatnam Port, saying that the company currently imports around 0.7 million metric tonnes per annum (MMTPA) of LPG through that port, and the port will “continue to be utilised, based on commercials”.
The company said that it currently imports LPG from various ports including Kandla, Mundra, Pipavav, Dahej, Mumbai, and Mangalore on the west coast, and Haldia, Visakhapatnam, and Ennore on the east.
“Two more import terminals are coming up at Kochi on West Coast & Paradip on the East. These will be used in due course of time,” IOC said, adding that LPG demand in India is rising rapidly, suggesting that LPG imports are expected to rise over the next few years. Therefore, OMCs are “constantly on the lookout” for new ports that make commercial sense, it said.
“Vizag Port imports about 0.7 MMTPA of LPG now. Proposal for new Port (Gangavaram) is of 0.3 MMTPA. Vizag will continue to be utilised. Availability of multiple terminals will give operational flexibility, increase competition among terminal operators & an opportunity for competitive rates,” IOC said.
On its rationale behind signing an initial pact with Adani Ports and SEZ for Gangavaram Port, IOC said that the facility at that port will have an added advantage over existing terminals in the region as it will enable the unloading of bigger LPG vessels, something that is not possible at the import terminals near the Visakhapatnam Port.
“Currently there are only two terminals near Vizag – SALPG (South Asia LPG, a JV of TOTAL & HPCL) & EIPL (East India Petroleum Limited – a pvt company). SALPG charges Rs 1050 & EIPL charges Rs 900 as charges with lower capacity vessel unloading capability…IOC has just signed a non-binding MoU with APSEL (Adani Ports and SEZ) till now. APSEL has offered a price of Rs 1050 for LPG import terminaling charges with facility of unloading of bigger vessels of refrigerated LPG directly,” IOC said.
“This gives an additional advantage compared to SALPG & EIPL as bigger vessels can be quickly unloaded. Such an arrangement will save freight & demurrage due to extra time for evacuation. There is no take or pay liability or any binding agreement, as of now,” the public sector fuel retailer added.
Pedestrians walk along a road past storage tanks in an Indian Oil Corp. facility near Jawaharlal Nehru Port, operated by Jawaharlal Nehru Port Trust (JNPT), in Navi Mumbai, Maharashtra, India, on Monday, March 30, 2020. (Bloomberg) 
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