India

Private oil companies may use PSU infra to supply aviation fuel at Mumbai airport

Private oil companies, including Reliance Industries (RIL) and Nayara Energy (previously Essar Oil) may soon be allowed to supply aircraft fuel (ATF) at Mumbai's Chhatrapati Shivaji International Airport (CSIA), giving competition to PSU oil marketing companies.

The development will help in offering better fuel prices to the airlines and subsequently benefit the fliers and cargo business. The excitement among the private players is due to the recent notification by the regulatory body, Petroleum & Natural Gas Regulatory Board (PNGRB), which suggested that HPCL and BPCL pipelines should be connected to the Mumbai airport as 'common carrier' and regulated by PNGRB in terms of applicable notified Regulations. PNGRB has sought comments from all the stakeholders on same.

The private oil marketing companies claim that the development will help them enter CSIA without investing a huge sum in terms of laying of separate pipelines or have logistic and security nightmare with the usage of hundreds of tankers.

"On the other hand using the surplus capacity available in the existing pipeline would bring reduction in the infrastructure charges to be paid by the ATF suppliers, vis-à-vis the charges for operation of the individual facilities, deriving immense cost benefit to the travelling air-passengers and would result in affordable air travel to the public in general." said a source in RIL.

According to the industry estimate, the present ATF demand at CSIA is 1.4 MMTPA which is serviced by IOC (0.82 MMT, 59%), BPCL (0.42 MMT, 30%) and HPCL (0.16 MMT, 11%). While the BPCL pipeline, which is around 20 km in length, has a capacity of 1.44 MMTPA, HPCL with about 15 km in length has a capacity of 1.10 MMTPA. Insiders claim that around 70% capacity of BPCL and 85% capacity of HPCL remain underutilized at present, which can thereby be used by others.

B Anand, CEO, Nayara Energy, said, "We welcome the initiative of PNGRB to declare the said pipeline on common carrier principle".

BPCL, HPCL, MIAL, Mumbai Aviation Fuel Farm Facility Ltd (MAFFFL) and RIL did not offer comment to the story.

Currently, oil PSUs namely HPCL, BPCL and IOCL, which hold equal partnership in MAFFFL along with MIAL, are operating from their respective facilities located at Sahar and Santa Cruz areas on the land provided by CSIA.

Amidst allegations of monopolistic practices, the Competition Commission of India (CCI) granted approval for developing the Integrated fuel farm facility (IFFF) to be set up by MAFFFL and once the IFFF is completed, the same can be used by any of the ATF suppliers for rendering competition-enhancing benefits. IFFF and the infrastructure could be used by any of the ATF suppliers, in an open access and arm's length basis, upon payment of a regulated common fee.

Therefore, an IFFF (built on an area of approximately 30,000 square meters and having a static storage capacity of 47,500 kilolitres of ATF) is being built which will operate from a single point to bring in the efficiencies of the integrated operations.

Mumbai city being the financial capital of the country sees tremendous passenger and cargo movements through CSIA. PSUs meet over approximately one-fifth of the total demand for ATF in the country.

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