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Cairn India seeks govt nod for supplying crude oil to RIL's SEZ refinery

20 Sep 2012 Evaluate

India’s biggest private sector exploration and production company, Cairn India, has again sought approval to supply fuel to the Jamnagar, Gujarat-based special economic zone (SEZ) refinery of Reliance Industries (RIL). The company currently sells 80,000 barrels per day or 4 million tons a year of crude from Rajasthan to RIL's domestic tariff area (DTA) refinery at Jamnagar and another 70,000 bpd to Essar Oil's Vadinar unit in Gujarat. Meanwhile, besides RIL and Essar refineries, it sells 15,000-20,000 bpd of Rajasthan crude to IOC.

However, as output from Rajasthan is set to rise, the company wants to sell this surplus oil to RIL only-for-exports or SEZ refinery, which is placed adjacent to the firm's DTA unit. Further, highlighting the quality characteristic of Rajasthan crude oil, Cairn India, in its letter to the Petroleum Ministry has underscored the ability of PSU buyers (IOC’s Panipat and Koyali refineries) only to off take part of the production, resulting in high dependence on private refineries for ensuring continuous production.

In earlier exchanges, the government had expressed hesitation over the deal on account of loss in revenues as supplies to an SEZ are exempt from central sales tax (CST) and cess payments. However, Cairn has debated that stopping production would cost the government more than supplying to the SEZ.

Peers
Company Name CMP
ONGC 279.25
Oil India 454.40
Jindal Drilling&Inds 535.85
Deep Industries 457.70
Asian Energy Service 297.85
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