Essar Oil to close 200 pumps

Spiralling international crude oil prices have taken their toll on Essar Oil. The private sector oil company, a part of the Rs 20,000-crore diversified Essar group, is temporarily closing down nearly 200 of its 514 petrol pumps.

More than 50 per cent of its retail outlets are located in Gujarat and Maharashtra and the rest in the northern states.

Some of the outlets have already been closed, while a few others have drastically reduced supply and may down shutters soon.

Sources close to the company said Essar Oil, which had cut supply to its dealers across the country by 25 per cent immediately after the rise in international crude oil prices and subsequently offered compensation to them, would continue to support franchisees while closing the outlets.

Essar Oil has, in fact, devised a plan to utilise the unfavourable price situation. It has asked franchisees to refurbish their outlets so that all Essar pumps can have a uniform "look and feel".

Essar Oil is the worst hit by the huge spurt in international crude oil prices as it does not have its own oil refinery.

IBP, another oil marketing company, too, does not have its own refinery but its parent company Indian Oil has refineries.

Other marketing companies have their own refineries and, therefore, have not been hit as hard as Essar Oil.

With international crude oil prices remaining high and the government's reluctance in permitting a revision in retail oil prices, Essar Oil will need to market products at unremunerative prices until domestic rates catch up with the international rates or its own refinery comes up. Its 10.5-million-tonne refinery is expected to come up in the second half of next year, ahead of schedule.

Industry sources said the closure of outlets meant a reduction in losses for the company. "Now, any increase in sales means higher losses as the loss per litre of petrol is pegged at Rs 7 and Rs 5 for diesel," said a source.

Essar Oil buys petrol and diesel from the Numaligadh, Kochi and Mangalore refineries. It supplies 1,80,000 kilolitres of oil a month to its dealers. It plans to add another 300 pumps in the short-run and ultimately have a chain of 2500 pumps.