The steep Rs 7.54 a litre increase in petrol prices will allow private fuel retailers — Essar Oil, Reliance Industries (RIL) and Shell India — to reopen a few of their outlets.
The move, said officials from Essar Oil, would allow the company to re-open 300-400 retail outlets across India. Of the total 1,200 retail outlets, the company has at present around 800 operational ones. “Last month, as the pricing differential was very high, nearly 400 of our franchisees had to shut down. Now we would be able to re-open them,” said a senior official. Essar operates on a franchise-based retail model; hence, the costs for opening an outlet are borne by the dealer.
Private fuel retailers have been selling fuel at Rs 6-7 higher than that of public fuel retailers. Till last month, these fuel retailers saw a drop in sales volumes to the extent of more than 70 per cent. Essar Oil had earlier said though volumes were pretty low at its fuel retail outlets, it activated few compressed natural gas (CNG) stations.
Until March 15 of Essar's outlets in its countrywide retail network have CNG and two outlets have Auto LPG dispensing facilities. S Thangapandian, CEO, marketing had earlier said, the company planned to increase these numbers to 50 and 25, respectively, in the next financial year.
Officials from RIL said till diesel is de-regulated, such price hikes would not be of much help. Till last month, the under-recovery on diesel for RIL was Rs 12 a litre. RIL's fuel retail outlets are doing ‘bare minimum’ business, as majority of RIL's outlets are on the highways, and customers do not come to the highways to buy fuel. The company, according to sources, has been supporting these outlets financially to keep them afloat.
An RIL spokesperson declined to comment on the development. RIL operates its around 1,450 outlets under three formats — dealer-owned, dealer-operated, company-owned, dealer-operated and company-owned, company-operated.
However, government-owned companies — Indian Oil, Hindustan Petroleum Corp and Bharat Petroleum Corp — dominate the fuel retail business, with more than 90 per cent share.
Private fuel retailers said they did not expect a fuel price to increase roll back. The rise, they said, was enough to cover the cost. Though there would be no margin, but there would be no loss and the under-recoveries would be covered in full.