Reliance Industries to Supply Fuel to Indian Railways

After an eight-year gap, private fuel companies such as Reliance Industries Ltd. will give a stiff competition to the State-owned companies in the huge Indian Railways market.

The private fuel retailers will now be supplying diesel to the Indian Railways. Earlier, the private companies failed to offer the low rates given by the State-owned companies. Hence, the 2.7 million ton market was solely captured by the three State-owned companies, since 2007. The three retailers are Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. Private fuel retailers were shortlisted in 2014. The companies have inked a rate contract with the Railway Board of Indian Railways. This contract is based on the lowest price offered by the companies. “Some marginal supplies have also begun from them,” a senior executive in the Railway Board in New Delhi informed.

In January, this year some media reports had informed that Reliance Industries and Essar Oil were chosen by the Indian Railways and the two may supply diesel for its locomotives. Both the companies started to supply diesel in April. Indian Railways altered the terms and conditions of the contract. Instead of the regular one-year contract, a check will be made at regular intervals like every quarter. If the company is able to further lower the price at that time, then it will have to reduce the rates to continue the contract.

Earlier ventures

After the government offered subsidies to the Public Sector Units and controlled the diesel price, the private players had quit. It is only after the prices have been de-regularized that the companies are expanding their businesses. The two companies have also charted a plan to re-initiate their fuel outlets in 2015. They had announced these plans after their annual results in April-May.

The re-opening of the fuel outlets by the private players was said to give a tough competition to the government companies. The threat to the State-owned companies will further intensify with the private companies entering the bulk Indian Railways diesel market.A report from the Oil Ministry states that India consumed around 70 million ton of diesel, in 2014. Out of this, Indian Railways consumed around 4%.

Export to Iran

The Mukesh Ambani-led company is also planning to export petrol and diesel to Iran, which it had quit, six years ago. The decision came after the recent signing of the nuclear deal.The oil products from the major refinery of Reliance Industries, located at Jamnagar of Gujarat, are at present being supplied more to the eastern markets.

An official from Reliance Industries informed, “Iran reaching a deal with western powers to curb its nuclear program in return of easing import and export restrictions, presents an opportunity to Reliance Industries.”

As the local refineries will begin, Reliance Industries anticipate fuel exports to the Middle East to reduce. Earlier, due the pressure from many countries including the US, Reliance Industries in 2009 ceased exports of gasoline to Iran.

Summary

After eight years, private companies such as Reliance will supply diesel to the Indian Railways.

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