Reliance Petro to roll out 500 outlets

Reliance Petroleum (RPL) will invest around Rs 500 crore in rolling out 500 retail outlets over the next three years.

The ministry of oil and natural gas has granted Reliance Petroleum marketing rights after it found that the company fulfiled conditions for Rs 2,500 crore investment. According to the ministry guidelines, any company wishing to get into retail operations for petroleum products has to have invested Rs 2500 crore in the sector.

However, RPL retail plans are not likely to be rolled out until after the second refinery in Jamnagar is operational. The 29 mmtpa - Rs 27,000 crore refinery is expected to go on stream by end 2009. Existing Reliance Industries (RIL) dealerships may also be transferred to RPL at a later stage. Reliance Industries has 1300 existing dealerships.

However, RIL retail operations were on the verge of closure with dealers threatening protests over the loss of business due to selling petrol and diesel at a higher price than public sector rivals.

Early August the company had worked out a package for compensating dealers for the loss they were making on petrol and diesel sales. About 750 RIL retailers of had signed the new concession agreement.

The concession agreement included waiving off network usage charges and a substantial increase in diesel margins. Further, the company agreed to bear the cost of interest on loans for three months and negotiated with banks to re-schedule dealers' loan repayments.

Following the crisis, the company had indicated that in future it would set up only company-owned outlets.

RIL, which like other private players had priced petrol and diesel at Rs 2.50 a litre higher than public sector firms, saw diesel sales plummet 70 per cent in June and July, leading to a fall in the market share to below 1 per cent from 14 per cent.

RIL retails 342 thousand tonnes (TMT) of petrol and 3,599 TMT of diesel. PSU companies, on the other hand, sell 8,681 TMT of petrol and 40,308 TMT of diesel.