The Telegraph
Since 1st March, 1999
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Petronet may be wound up

New Delhi, Jan. 25: There is a serious move afoot to wind up Petronet India Ltd, a joint venture formed by all the national oil majors in 1997, to lay oil pipelines in the country.

Sources said the step is being contemplated since all oil companies have now been permitted to lay pipelines on the basis of the common carrier principle. The downstream petroleum regulatory authority has also been put in place recently to oversee such matters. The regulator will ensure that a reasonable tariff is charged from users and sufficient capacity is provided to them.

Another reason for closing down Petronet is that it has failed to raise resources from financial institutions for some important projects such as the 523 km Chennai-Trichy pipeline.

Banks and financial institutions have been insisting on including a take-or-pay clause before extending loans which Petronet cannot afford to furnish.

Indian Oil Corporation is now planning to take up this Rs 540-crore project on its own as the banks are more forthcoming in extending loans directly to the Fortune 500 company.

National oil companies Indian Oil, Bharat Petroleum and Hindustan Petroleum together hold a 50 per cent stake in Petronet while Reliance Petroleum and Essar Oil hold a 10 per cent share each. The remaining 30 per cent equity is held by ICICI, IL& FS and SBI.

The company was set up to prevent wasteful duplication of pipeline facilities and spread the economies of scale among all the interested companies. The current thinking in the oil sector is that this objective can be achieved with all oil companies being asked to accommodate those interested in transporting their products through their proposed pipelines.

It has also been made mandatory to allow for a 25 per cent extra capacity that could be used by other companies.

In recent years, there has been an emphasis on switching the transportation of petroleum products from railways to pipelines as it considered a more cost efficient and safer mode.

Since the earlier pipeline proposals had to be routed through the public investment board of the finance ministry this had delayed most projects.

Petronet was, therefore, set up to take decisions directly and expedite investment in pipeline projects. Among the projects taken up by the company were the 117 km Vadinar-Kandla pipeline, the 292 km Cochin-Karur pipeline, and the 364 km Mangalore-Hassan-Bangalore pipeline.

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