Reliance Industries asked to pay Rs 500 mln to BPCL by Supreme Court

06-May-08

The Supreme Court has asked Reliance Industries to pay Rs 500 mln within two weeks to BPCL against BPCL's demand of Rs 1.1 bln. This amount has to be paid by RIL as the price difference in naptha supplied by BPCL to RIL plant at Patalganga. In August 1986, BPCL and Reliance had entered into an agreement for supply of bulk naphtha as feedstock for manufacture of purified terephthalic acid (PTA). The naphtha was supplied by BPCL, was processed by RIL in its plant, and after extracting PTA, the balance naphtha was returned to BPCL. Under the agreement, BPCL had agreed to supply special cut naphtha (SCN) of 110/140 cut grade for Reliance's petrochemical plant at Patalganga in Raigad district at Rs 944.87/MT, the price fixed by the Ministry of Petroleum. BPCL increased the price of SCN from Rs 944.87/MT to Rs 1,054.40/MT (add-on to the Ministry fixed price) in October 1991. RIL had contended that even the rate of Rs 944.87 per MT was excess but continued to pay at this rate. However, RIL referred the matter to arbitration seeking a refund of over Rs 400 million, saying BPCL did not incur any excess cost and even the rate of Rs 944.87 per MT was higher. In September 2000, the arbitrator rejected RIL's claim and asked it to pay Rs 441 million plus interest payable at the rate of 11% pa from November 1994.