Private sector fuel retailers Reliance Industries Ltd (RIL) and Essar Oil are varying prices of petrol and diesel from state to state to ensure that losses and profits are balanced. This even as they struggle to retain market share in the face of stiff competition from state oil companies, which can sell fuel at less than the cost as they are compensated for this by the government.
“We are following the revenue-neutral model in petrol and diesel to retain our market share. While the private sector’s price for diesel is mostly on a par with what PSUs are offering, our petrol is more expensive,” said an official with a private company. The private companies had filed a petition against the PSUs with the Petroleum and Natural Gas Regulatory Board alleging the latter were guilty of “predatory pricing” in case of transport fuels. They had appealed to the board to levy a penalty on these PSUs.
Now, the private sector is hopeful that the Kirit Parikh committee, likely to give its report by the end of this month, will recommend ways to ensure a level-playing field.
In three states, Essar is selling petrol and diesel at prices that are same as what the PSUs are offering. In another six, it is selling diesel at a price the three PSUs are charging, while charging more for petrol. In other states, the company is charging 50 paise to Rs 2 a litre more for both products. RIL is following similar pricing.
Both were forced to shut their retail operations in early 2008, when crude oil prices reached a high of $147 (over Rs 6,700, at latest exchange rates) a barrel. Essar Oil has since reopened all its 1,294 outlets and is selling both petrol and diesel. The company plans to expand the number of outlets to 1,500 by March this year. The company is hopeful that a level-playing field will come into play soon and is getting ready for it.
RIL has restored operations at 450 fuel outlets, located mostly in western and southern states. The company is selling both petrol and diesel. The remaining 980 outlets are still closed. RIL had invested Rs 5,000 crore in setting up these outlets. It is not looking to expand unless a level-playing field is created.
The government regulates prices of petrol and diesel sold by state-run oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation even if it means these companies incurring losses. These losses are made up by government bonds and discounts by oil producers. For instance, the PSUs are currently incurring a loss of Rs 3 on every litre of petrol and Rs 2 on every litre of diesel.