Indian Oil Corporation to Govt: RIL gas cut may spark diesel crunch

Posted By: Religare
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RIL gas cut may spark diesel crunch
The issue related to reduction in supply of gas from Reliance industries has been raised by Indian Oil Corporation. The company has further indicated that this decreased supply of gas can lead to increased demand of diesel and which could also not be entertained, as diesel itself is available in limited quantity.

Oil Ministry has earlier ordered the RIL to discontinue its gas supplies to non-core industries like refineries, petrochemicals and steel plants. This decision has come from government in view of the decreased production at KG-D6 fields. The company enacted on the government orders from May 9, 2011.

IOC also has indicated the government that further decrease in supply will lead to imports of diesel and this would raise the production cost of the company to a great level. The gas imported is expected to be far expensive then what the company acquires from RIL and might lead to losses to the company.

Moreover due to this decline in the supply of gas, IOC will have to use its own diesel reserves of around 200,000 tonnes to compensate the shortage of gas. This usage of diesel by the company itself will affect the supply in the market with the equivalent amount. Further the amount that the company invested in upgrading the machinery for using gas as a fuel will go in vein.

View: It is important for the government to deregulate the prices. Also perhaps the government should call consultants to look into the operations of Reliance Indiustries and submit a report if the company is purposefully stopping the supply.

Story first published: Tuesday, July 19, 2011, 9:30 [IST]
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