IOC contradicts Adani over terms of port use agreement for LPG imports

Oil firm says there is no ‘take-or-pay’ liability for hiring APSEZ’s Gangavaram port; PSU tweets clarifications after Trinamool MP Mahua Moita raises possibility of a questionable transaction in IOC entering into an agreement without floating a tender

February 16, 2023 09:30 pm | Updated 11:19 pm IST - New Delhi

 Gangavaram port in Visakhapatnam. File

Gangavaram port in Visakhapatnam. File | Photo Credit: The Hindu

Indian Oil Corporation (IOC) on Thursday took to Twitter to clarify on its initial pact for hiring Adani Group's port at Gangavaram in Andhra Pradesh for LPG imports in addition to existing pacts with nearby ports, saying there is no take-or-pay agreement.

The statement, which came in response to Trinamool Congress MP Mahua Moitra raising a stink of a scam in hiring of the port facility without a tender, contradicted Adani Ports and Special Economic Zone Ltd's earning call presentation that said "MoU signed with IOCL for a take-or-pay contract at Gangavaram Port for building LPG handling facilities."

Ms. Moitra, reacting to the news based on the statement in the presentation, tweeted, "Brazen theft".

Tagging Oil Minister Hardeep Singh Puri and CVC on Wednesday evening, Ms. Moitra said, "No tender. No CVC norms. Moving business from Vizag Port to Gangavaram. Skimming from coal, skimming from gas, now skimming from 'chula' in every household. Shame!".

IOC in an unusual move on Thursday sent out a series of tweets to clarify its position.

"IOC has just signed a non-binding MoU with APSEZL till now," it said, adding that it floats no tenders for hiring of facilities at ports to import LPG - a commodity that India is short of production.

"There is no take-or-pay liability or any binding agreement, as of now," it said.

A take-or-pay contract means that the State-owned firm will have to pay for using the terminal's full 5 lakh tonnes capacity a year even if it ships less than the committed quantity.

IOC currently uses State-run Visakhapatnam or Vizag Port, located adjacent to Gangavaram port, to import some 7-8 lakh tonnes of LPG annually.

APSEZL, the ports unit of the Adani Group, had revealed the plan while announcing the company's third quarter financial results on February 7.

Ms. Moitra's party is among the Opposition parties which have been demanding a probe into allegations a US. .short seller has levelled against the Adani Group.

Hindenburg Research on January 24 accused the Adani Group of accounting fraud and stock manipulation, allegations that the conglomerate has denied as "malicious", "baseless" and a "calculated attack on India".

Listed companies of the Adani Group lost over $125 billion in market value in the last three weeks. Stocks of most group firms were up on Thursday.

Replying to Ms. Moitra's tweet, IOC said it imports LPG at various ports, including Kandla, Mundra, Pipavav, Dahej (in Gujarat), Mumbai and Mangalore (in Karnataka) on West Coast and Haldia (in West Bengal), Vizag (in Andhra Pradesh) and Ennore (in Tamil Nadu) on the East.

Two more import terminals are coming up at Kochi in Kerala and Paradip in Odisha. "These will be used in due course of time," IOC said.

"IOC enters into agreements with various ports on a regular basis to enhance capability to supply LPG across India. For hiring of LPG terminals, OMCs evaluate the infrastructure for suitability for catering to the nearest market at a reasonable cost. No separate tender is invited," it said.

OMCs are Oil Marketing Companies.

"LPG demand in the country is on a constant increase. There are 31.5 cr connections after the Ujjwala Scheme; up from 14 cr earlier. OMCs are constantly on the lookout for new port facilities which make commercial sense in Logistics," IOC said.

Providing detailing about the terminal hiring pacts on the east coast, the company said currently there are only two terminals near Vizag - one by South Asia LPG (a joint venture of France's TotalEnergies and HPCL) and East India Petroleum Limited (a private company).

"SALPG charges ₹1,050 and EIPL charges ₹900 as charges with lower capacity vessel unloading capability," IOC said.

"EIPL facility has no captive connectivity to be used on a continuous basis. IOC has just signed a non-binding MoU with APSEZ till now. APSEL has offered a price of ₹1,050 for LPG import terminaling charges with facility of unloading of bigger vessels of refrigerated LPG directly," it added.

The Gangavaram port would allow handling of bigger vessels.

"This gives an additional advantage compared to SALPG & EIPL as bigger vessels can be quickly unloaded. Such an arrangement will save freight & demurrage due to extra time for evacuation. There is no take-or-pay liability or any binding agreement, as of now," IOC said.

While 0.7 million tonnes per annum of LPG is imported at Vizag port now, the new port is for handling 0.3 million tonnes.

"Vizag will continue to be utilised. Availability of multiple terminals will give operational flexibility, increase competition among terminal operators & an opportunity for competitive rates," it added.

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