The move obviously means that Reliance will have to bear the losses arising out of the excess production. Further, the company will have to rely on IOC to export its surplus production, and IOC for the first time will be exporting petroleum products other than naphtha. To add to the company's problem is the commissioning of grassroot refineries as well as expansion within the country. This will not only ensure that prices of petroproducts will be low in the domestic market but also that there will be excess production in the country. As more than nine million tonnes of refining capacity will be added in the public sector, that much of demand will be mopped up, and that means lower demandavailable to the private players.

If the government would have allowed private players to be reimbursed the loss due to exports, all the companies in the oil sector would have been affected, because the loss would have to be reimbursed through the oil pool account.

The least the government could have done was to allow Reliance Petroleum apart from IOC to sell its product in the international market. In any case, Reliance Petroleum will be allowed to sell its product both in the international as well as domestic market after 2002.

None of the Indian companies have the expertise to sell petro-products in the international market, which is likely to be even more competitive as imports into the country have stopped and the same excess quantity will be available in the international markets. Industry sources say that imports of diesel and kerosene are likely to be lower by 60 per cent in the current year from 22 million in 1998. In fact, traders in Singapore are shifting their focus from supplyingpetro-products to India to crude oil supply. Import from Singapore at $380.5 million is likely to drop steeply. The potential for India as a crude oil market is so high that Itochu Petroleum of Japan is shifting its global oil trading headquarters from Tokyo to Singapore to get better access to the Indian market.

Given that Reliance Petroleum through IOC will have to compete with some of the major players in the international market, at a time when crude oil prices have risen but petro-products prices have yet to follow suit, a serious impact on the company's profitability may be expected.