Wheel of fortune

New Delhi, Jan. 2: The road is being paved for Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corporation Ltd (HPCL) to take over the ailing Mangalore-Hassan-Bangalore product pipeline.

According to petroleum ministry sources, the stakes of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and IBP Ltd in the pipeline project will be handed over to MRPL and HPCL as the consortium approach for running the pipeline has not worked.

Senior HPCL officials blame IOC and BPCL for not utilising the 300-km pipeline as a result of which the pipeline did not get enough products to transport to make the project financially viable.

Since the net worth of the pipeline has been eroded, it will have to be wheeled into the sick bay of the bureau of financial and industrial reconstruction if the government turns down a financial bailout.

Sources disclose that the pipeline project is currently being evaluated in order to arrive at market value for the shares.

IOC has been accused of not taking a sufficient interest in the project. IOC is the biggest oil company and is reportedly not satisfied with only a 12.5 per cent stake in the project.

BPCL also holds a 12.5 per cent stake in the pipeline project in which IBP has a 2 per cent stake. The shares are held through Petronet India Ltd, an umbrella organisation floated for the joint venture.

IOC now has no interest in the Mangalore-Hassan-Bangalore pipeline as it wants to lay its own, connecting Chennai and Bangalore. The IOC board has reportedly cleared the project and the company is preparing for a detailed feasibility study.

An IOC official told The Telegraph the proposed Chennai-Bangalore pipeline would cover 350 km. Since the project is estimated to cost less than Rs 500 crore, oil PSU will not require the petroleum ministry’s approval for the project.

However, this pipeline will directly compete with the Mangalore-Hassan-Bangalore pipeline and the question of a wasteful duplication will have to be taken into consideration by the petroleum ministry.

IOC and BPCL both had shown little interest in the project after it was completed. The two companies rather preferred to transport a major chunk of the products by road than carrying through the pipeline.

IOC had sparked a controversy at the time the pipeline was laid by stating that the tariff was too high. But, HPCL had pointed out that the general norm applicable for fixing the tariff for all pipelines in the country ? at 75 per cent of the rail tariff over the same distance ? had been used.

IOC, however, argued that the rail tariff should be calculated over the crow flight distance from Mangalore to Bangalore.

This argument was largely seen as an excuse for not using the pipeline as it is not possible to have a straight railway line between the two cities due to the terrain of the Western Ghats.

Even the pipeline could not be laid in a straight line as it is physically impossible to accomplish this task in the difficult hilly terrain.