India Rejects BP's Jet Fuel Play

India has rejected a request from BP Plc to be allowed to sell jet fuel to the booming aviation market in Asia's No. 3 economy, saying it did not meet the conditions necessary, a source with direct knowledge of the decision told Reuters.

Consumption of aviation fuel is set to rise in India as domestic air traffic is estimated to almost triple this decade, with more of the country's 1.25 billion people starting to fly and as airlines connect smaller cities.

Demand for aviation fuel in India could rise by 2.2 percent in the financial year beginning in April, according to the Petroleum Planning and Analysis Cell in the federal oil ministry.

BP is not the only overseas company interested in India's jet fuel retail business, which is dominated by state refiners. Royal Dutch Shell Plc (RYDAF) already sells a small volume of jet fuel in a tie-up with state-run Mangalore Refinery and Petrochemicals Ltd.

The source declined to cite the precise reason for BP's request being turned down by the oil ministry.

According to Indian rules, marketing rights for jet fuel can be given only to companies investing or proposing to invest at least 20 billion rupees ($319 million) in exploration and production, refining, pipelines or terminals in the country.

In 2011 BP agreed to buy a 30 percent stake in oil and gas blocks operated by India's Reliance Industries for $7 billion and also invested funds for further exploration and development.

It applied for a jet fuel marketing licence for the second time last year.

However, according to the source, who did not wish to be identified, the oil ministry wrote to the company this month saying it did not meet the conditions specified for marketing aviation fuel in the country.

"BP has been continuously engaging with the Ministry of Petroleum and Natural Gas regarding the licensing application and we are confident we meet the requirements," a spokeswoman said in an email.

"We will continue to work closely with the Government authorities and urge them to review the decision."

By Nidhi Verma