The Telegraph
Since 1st March, 1999
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Tussle over Numaligarh control

New Delhi, Sept. 19: The petroleum ministry will be holding a high-level meeting next week to consider Oil India Ltd’s (OIL) demand for a 51 per cent stake in Numaligarh Refinery Ltd (NRL).

NRL is currently a subsidiary of Bharat Petroleum Corporation Ltd (BPCL). While BPCL owns a 51 per cent stake in the refinery, OIL has a mere 10 per cent share.

OIL has staked its claim for management control of the refinery as most of the upstream oil major’s oilfields are situated in the north-east and it would like to move up the value chain by entering the downstream oil refining business.

With upstream oil major ONGC having acquired Mangalore Refinery and Petrochemicals Ltd (MRPL) recently to become an integrated oil company, the OIL claim has also been strengthened.

Sources disclose that the issue has picked up momentum with MPs from Assam having met the Prime Minister last month. The MPs were keen that NRL be handed over to OIL. They had also met petroleum minister Ram Naik on the issue.

The OIL case is that with an assured supply of crude the refinery could operate at a better capacity and exploit the economies of scale. The fact that there is a synergy between OIL and NRL is also reflected in the fact that BPCL has initiated talks with OIL for the supply of newly found natural gas to the captive power plant of the refinery.

BPCL is currently using naphtha as a fuel to generate power and would like to substitute it with natural gas which is cheaper. This would then enable it to market the naphtha to shore up its bottomline.

While BPCL has been maintaining that it is keen to continue with the management of NRL, it is facing problems in marketing the products of the refinery. BPCL has very few retail outlets in the north-east where the petro goods business is dominated by Indian Oil Corporation. It, therefore, may not be averse to handing over the management control to OIL although the company may resort to some hard bargaining to get a good price for its equity.

NRL is referred to as the “Assam accord” refinery since it was set up as the result of a political decision to promote industrialisation in the strife-torn state. However, from the economic standpoint it is not ideally situated as the north-east market is too small to absorb its products which have to be sold outside the region. This makes marketing a high-cost affair which impacts the bottomline of the refinery.

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