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Reliance banking on exports to offset domestic losses

Reliance banking on exports to offset domestic losses
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First Published: Fri, Jun 01 2007. 01 30 AM IST
Updated: Fri, Jun 01 2007. 01 30 AM IST
New Delhi: Reliance Industries Ltd, owner of the world’s third-biggest oil refinery, may increase fuel exports this year to offset losses from the domestic market, traders and a government official said.
Overseas shipments may rise 17% to 20 million tonnes this year, according to the average of four traders’ estimates in a Bloomberg survey. The refiner may sell all of its petrol and diesel overseas and buy lower-grade supplies for retail outlets from domestic producers, a petroleum ministry official said, asking not to be identified because of government policy.
Chairman Mukesh Ambani’s 6,60,000 barrels-a-day plant is incurring losses in India because state-run rivals sell fuel at below cost under government orders. Reliance cut domestic sales of petrol and diesel last year as it couldn’t compete with Indian Oil Corp. (IOC), the biggest refiner.
Of the total losses of state-owned refiners, a third is reimbursed by the government as bonds, an equal amount is paid by companies such as Oil and Natural Gas Corp., and the refiners bear the remainder.
Non state-run retailers, such as Reliance, aren’t compensated for any loss because the government doesn’t order them to sell fuels at below-market rates.
“They don’t want to sell in the local market where they are losing money,” said S. Raghunath, country head of the oil division at Trafigura Beheer BV, a trading company.
“They would rather export the premium grades and make more money on it than sell in the local market.”
Reliance spokesman Tushar Pania declined to comment. The company’s eight-year-old refinery produces the Euro IV motor fuels that meet regulations of countries such as the UK and the US.
Losses on retailing oil products prompted Reliance to stop sales at some stations, cutting its market share to 2% in September from 13% in April 2006, the company said on 26 April. Its market share was at 6.3% in March.
The refiner last year sold about 4,30,600 tonnes of petrol and 2.07 million tonnes of diesel through its retail stations, according to data from the petroleum ministry.
Reliance’s exports rose 63% to 17.7 million tonnes in the year ended 31 March from 10.8 million tonnes a year ago. That accounted for 57% of the company’s production.
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First Published: Fri, Jun 01 2007. 01 30 AM IST
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