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Oil companies go slow on retail spread

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Ajay Modi New Delhi
Last Updated : Jan 19 2013 | 11:26 PM IST

Retail expansion of the public sector oil marketing companies (OMCs) — Indian Oil, Hindustan Petroleum and Bharat Petroleum — registered a significant decline in the year gone by, thanks to the earlier sharp surge in crude oil prices and growing under-recoveries of the companies.

So far in the financial year, the OMCs have opened only 800 retail fuel outlets vis-a-vis 2,079 the previous year.

The Minister of State for Petroleum and Natural Gas, Dinsha Patel, had told Parliament last month that the OMCs proposed to open 1,680 outlets during the current year. However, an OMC official said there was no target for commissioning of retail outlets and the expansion depended on economic viability.

“The higher sales through an increased number of outlets would have resulted in higher under-recoveries, since the sale of petrol and diesel is subsidised. It makes sense to put capex on hold,” said an analyst.

The Indian basket of crude oil had touched a record of $142.04 a barrel in July 2008. Despite the recent softening of prices, the average price for the Indian basket of crude in the current year stands at $84.41 a barrel, against $79.25 for all of 2007-08. And, the benefit of recent softening has been partly offset by the depreciating rupee, which has lost over 26 per cent since last April, to the level of Rs 50.73 a dollar.

The OMCs are estimated to close 2008-09 with under-recoveries of Rs 103,908 crore. Of this, Rs 70,967 crore has been compensated by the issue of state bonds, while another Rs 32,000 crore has been absorbed by the upstream companies. The OMCs have declared losses on this amounting to Rs 11,094 crore for April-December.

The situation of private oil companies, Reliance Industries and Essar Oil, was worse. Both companies were forced to shut their retail outlets for most of the year. While Essar has now reopened most of its 1,250 outlets, Reliance has yet to reopen its 1,400 outlets.

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First Published: Mar 26 2009 | 12:54 AM IST

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