Kerala against making CRL subsidiary of BPCL

He expressed regret that the Centre should make a profit-making company as a subsidiary of the BPCL even as Centre’s investment in the state was coming down over the years.

The Centre was discriminating against the Cochin Refineries by making it a subsidiary of the BPCL at a time when it got the clearance for setting up a 500 mw power project at a cost of Rs 1,500 crore while it was sparing Madras Refineries, a similar company, he said.

Chandy said by making Cochin Refineries a subsidiary ofthe BPCL the Centre hoped to get Rs 800 crore by disinvesting 55 per cent of its stake. This was happening at a time when the company increased its profit from Rs 353 crore in 1997-98 to Rs 485 crore in 1998-99.

Cochin Refineries was also embarking upon a major expansion programme including increasing its production capacity from 7.5 million tonnes to 13.5 million tonnes. At the same time Central investment, which should be four per cent was as low as 1.5 per cent in the state, he added.

EEB adds: Meanwhile, Cochin Refineries (CRL) is reported to have stated that it would like to maintain their status as stand-alone refining companies and not be subsidiaries of stronger marketing allies as suggested by the Nitish Sengupta committee report.

CRL, at a meeting with the ministry of petroleum and natural gas, has also reiterated that it would like to make its own marketing arrangements with one of the big three — IOC, BPCL or HPCL. IOC has already entered into a five year marketing agreement with CRLand is in the running with BPCL to forge a similar pact with MRL.

Interestingly, in its turn, IBP has maintained its stance made over a year ago that it favours a strategic alliance with MRL and CRL so that it can hold its own in the south. As for the northern region, the company is of the opinion that it can enter into an agreement with IOC. IBP made this proposal during the time the Disinvestment Commission recommended a partial sale of government equity in the company to a strategic partner.

The petroleum ministry is believed to have told the oil companies at the meeting that a decision would be taken on the issue within a month. The ministry’s verdict would be of paramount importance to BPCL which sorely needs products given that it has over 4,000 retail outlets but only one refinery in Mumbai with a capacity of six million tonnes. The only way it can effectively compete is to ensure that it enters into marketing arrangements with MRL and CRL so that its survival is not at stake in a deregulatedscenario.

This becomes especially important in the backdrop of strong multinational oil companies keen on getting a foothold in marketing petro-products in India. Recent reports have indicated that Shell and Aramco have revived their proposal to set up a 25:25 downstream venture here where the retail outlets of a strong marketing company would be the base for operations. This would leave companies like BPCL extremely vulnerable and could in fact compel them to spin off their marketing strengths to the venture.