RIL disagrees with Indian Oil on JV proposal
The proposed joint venture (JV) between Reliance Industries Ltd (RIL) and Indian Oil Corporation (IOC) for setting up city gas distribution projects in the country may fizzle out as Reliance disagrees with IOC’s new proposal for a 50:50 JV.
On September 21, IOC had placed a proposal of forming a JV company with Reliance for city gas projects before its board. Reliance and IOC were to hold 51:49 stake in the new company. However, this was turned down by IOC’s board, which did not favour minority participation by the state-owned refining and marketing major.
When contacted, IOC chairman and managing director Sarthak Behuria told FE that he was still discussing the proposal with Reliance.
Asked to comment on the reluctance by Reliance towards the new proposal, Behuria said, “IOC does not have gas while Reliance is sitting on huge gas reserves. That’s the reason they want a majority stake in the JV company. However, the proposal is not off as we are still talking to them. The outcome of our discussions will be discussed at the next board meeting.”
Sources close to Reliance said that the company is also in talks with other companies, besides the US energy major Chevron, for floating a new gas distribution company in India.
Skid marks
• On September 21, IOC had placed a proposal for forming a JV company with Reliance
• Reliance and IOC were to hold 51:49 stake in the new company
• Reliance is also in talks with US major Chevron
Although both IOC and Reliance are archrivals in the oil industry, the two decided to form a JV for city gas distribution by leveraging on each other’s strengths. While Reliance has huge gas reserves in its Krishna Godavari and Mahanadi basin fields, Indian Oil has the biggest retail network in the country, which was to be leveraged for retailing CNG and LPG used by automobiles.
As against the 1,300 odd retail outlets of Reliance, IOC has 30,000 petrol pumps all over the country. IOC itself owns more than half of this number.
Under the earlier model, which was rejected by the IOC board, while the non-voting chairman would be appointed in rotation, the majority stakeholder would be entitled to keep the managing director’s post. Besides, there will be two directors from each company.
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