Export units free to import fuel for captive power

NEW DELHI: Export-oriented manufacturing units are expected to see significant cost savings with the government allowing free imports of fuel for their captive power plants, and become even more keenly competitive than they already are.
Companies which have been sourcing their fuel for captive power plants from domestic oil companies have had to buy the product at import parity prices which include steep duties of almost 20%. However, now with this gift of the mini exim policy export manufacturing companies can import the fuel on their own on an actual user basis without paying any import duty.
With heavy shortages in power supplies in almost all states, most export manufacturing units have resorted to putting up their captive power plants to ensure reliable and steady power supplies. As these capacities are relatively small, the captive power plants usually depend upon fuels like naphtha, furnace oil, fuel oil or even diesel at times.
Domestic oil companies who sell all the products including petrol, diesel or any of the other petro-product at import parity prices will now have to face a hard choice of either renegotiating their prices for these companies or export the product. In which ever way, the manufacturing companies are expected to use this exemption to bargain a better price from the domestic fuel suppliers. But, manufacturing firms may face some problems in importing small parcels as they are not equipped with the required infrastructure facilities.
However, some industry players say it is only expected to give some psychological advantage to big manufacturing companies while bargaining for purchasing price deals. Says an industry source: “Such imports could actually turn out to be slightly expensive because of several factors: one, they may not be able to strike good price deals as they would be buying in small quantities; two, there will be a carrying cost to such imports as they will have to maintain inventories for minimum 2-3 months. These companies also will have to create the infrastructure for facilitating such imports.�
Oil company sources say they would have to weigh the economic fallouts before finalising strategy. “We may even resort to exporting the products like we have done in the case of naphtha in the past. Although there are export losses, we may avail of some export benefits as well. The bottomline is we will go in for a strategy which will give the best returns,� an oil company official said.