India's RIL to invest $2.5 bln in power plant, seeks Jamnagar EoU extension

MUMBAI (Thomson Financial) - India's largest private-sector company Reliance Industries Ltd. (RIL) is planning to invest $2.5 billion in its captive power project and is seeking an extension of the export-oriented undertaking (EoU) status for its Jamnagar-based refinery, according to a senior company official.

Reliance's president for planning and business development, Partha Maitra, said the company intends to gasify refinery residue, petcoke, for use as fuel for its refineries as an alternative to crude-based fuel in wake of rising crude oil prices. Maitra added the company is likely to take a decision on the project in six months.

Maitra also told reporters extending the EoU for its Jamnagar refinery, which expires in March 2010, will help the company combat losses in the domestic market.

Reliance Industries and other private sector companies in India incur losses on the sale of petroleum products as state-run oil marketing companies are mandated to sell the same at lower prices. Private sector companies do not get access to the government's oil bonds, available to state-owned oil marketing companies, which help them underwrite the cost of selling petroleum products at huge discounts.

Reliance Industries had earlier announced plans to shut down 900-950 of its retail petroleum outlets of the total 1,350 outlets. Maitra said the move will not lead to job cuts and all its personnel in these outlets will be redeployed in other company functions.

He added that the company is currently compensating its dealers for their fixed cost outgo and the real-estate and other facilities of these outlets will stay idle, until the company re-starts it operations in future.

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Source: Forbes