Competition in petroleum fuel retailing is getting warmer, even as the government established the Kirit Parikh committee to suggest reforms in pricing.
The two private fuel retailers, the Ruias-owned Essar Oil and Mukesh Ambani’s Reliance Industries Ltd (RIL), are both expanding the rollout of their outlets, after a long period of rollback and dormancy. RIL has, in recent days, re-opened 400-odd outlets from around 70-odd a few months earlier. The company once had around 1,450 fuel retail outlets and then shut almost all; its market share is now only around 0.5 per cent, say industry players; RIL declined to disclose sales. While Essar Oil is selling around 110,000 kilolitres (kl) a month, industry sources said RIL is selling around 15,000 kl.
In April, RIL had surrendered the export-oriented unit (EoU) status for its 33 million tonne per annum (mtpa) refinery at Jamnagar in Gujarat to be able to re-enter the retail fuel market. RIL, in a media release had said, “The (Jamnagar) refinery will now operate as a non-EOU unit to cater to the increasing demand for petroleum products in the country. It will sell petro products in domestic and overseas markets.”
In May 2008, RIL had closed almost all its outlets, due to mounting losses as it was selling fuel much above the subsidised retail prices of state-owned oil companies. Essar Oil, on the other hand, operates around 1,278 retail outlets and has around 2 per cent market share. The company’s plans are to take the number of outlets to 1,500 by March .
While Essar Oil is selling auto fuel at par with rates of public sector companies that dominate the market, RIL is selling petrol at a Rs 2.50 premium to their prices at certain locations. The company, however, has priced diesel at par with PSU firms. “Our mainstay is diesel. Our outlets are mainly on the highways, so not many petrol users come to us. Higher petrol pricing helps us keep losses away,” said an RIL official.
Government-owned oil marketing companies are selling petrol at Rs 48.76 a litre and diesel at Rs 36.70 a litre in Mumbai, and at Rs 32.87 a litre for diesel and Rs 44.63 a litre for petrol in Delhi. Indian Oil Corporation has over 18,000 fuel retail outlets. Bharat Petroleum Corporation has over 10,000 and Hindustan Petroleum Corporation over 9,000.
“The private companies are banking on the Kirit Parikh committee report to have a level playing field and increase their market share. Also, if fuel prices are de-regulated, the proposed RIL and Indian Oil Corporation joint venture to operate the former’s retail outlets may not be needed,” said an industry expert on retailing.
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The five-member Parikh panel was established last month and told to give a report in three months. The expert group will examine the current pricing policy of the four sensitive petroleum products — petrol, diesel, PDS kerosene and domestic LPG, and make recommendations for a viable and sustainable pricing policy for these products. Kirit Parikh, who chairs it, is a former member (energy) of the Planning Commission. Also on the panel are Isher Ahluwalia, head of the Indian Council for Research into International Economic Relations, and Suman Bery, head of the National Council of Applied Economic Research, beside the secretaries of finance and petroleum ministries.
This is the third high-level panel to be reporting on the issue. The earlier ones were chaired by C Rangarajan, currently chairman of the Prime Minister’s Economic Advisory Council, and by B K Chaturvedi, former Cabinet Secretary. Their reports have not been fully implemented.