Wednesday, 7 January 2015

New Delhi: After a gap of almost seven years, Reliance Industries is gaining a foothold in supplying diesel to the Indian Railways.

Until now the bulk supply market was dominated by public sector oil marketing companies such as Indian Oil Corporation. Railways is the single largest consumer of bulk high-speed diesel (HSD).

Sources said that Reliance has offered a discount of about ₹1.50 a litre to the Railways. Bulk diesel in Delhi is available at ₹49.12 a litre. The rates vary between cities, depending on the distance from the depot.

Railway Ministry sources said private suppliers such as Reliance and Essar are on the suppliers’ list, but did not confirm anything officially. The Railway Ministry spokesperson did not respond to queries fromBusinessLine.

With diesel pricing now completely deregulated, private companies are also competing with PSUs to get a share of the Railways’ annual business, which is about 2.7 billion litres. However, it will be tough going for the private players as they will be hampered by infrastructure (terminal network) constraints.

A Reliance official in the know said that the category is not new to company. It had been supplying earlier, but because of the distortion in diesel prices (subsidy) it had to look at other markets.

Negotiating tool

In fact, the discount rates offered by private retailers are used by the Railways as a negotiating tool to get better rates from the PSUs. “Today, it is an open market and everyone will try to get the best deal,” said an official from a PSU oil company.

The Railways buys HSD through an annual rate contract with the oil marketing firms. It invites bids from firms, keeping the discount level as a parameter.

Once the discount rate is agreed upon, the Railways informs its zones and the zonal Railways are then free to procure diesel from oil companies having depots in their zones.

Source: Rail News


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