Rising losses on the sale of petrol and diesel has prompted Reliance Industries Ltd (RIL) to shelve its plans of reopening its retail outlets. The company had earlier resumed operations in 750 of the 1,433 outlets it had shut down in 2008.
An industry official confirmed that RIL has decided not to operationalise the remaining outlets following rising losses on both petrol and diesel. However, RIL refused to comment on the development.
According to industry experts, to keep pace with public sector oil marketing companies on the retail price, private sector retailers RIL and Essar Oil are losing up to Rs 2 per litre on petrol and Rs 5 per litre on diesel. They have been selling petrol at the same rate as OMCs but charging Rs 2 more for diesel.
At the peak of its fuel retail business in 2005-06, RIL commanded a marketshare of 15 per cent in diesel and 7.3 per cent in petrol, with as many as 1,433 outlets across the country. Essar Oil currently operates 1,385 outlets and had plans to scale it up to 1,700 by March.
The year 2008 proved to be a game changer in the petrol and diesel segments, with global oil prices touching the $147 a barrel mark. RIL and Essar were priced out because subsidy was available only to the three government-owned companies.
RIL had subsequently shut all outlets by April 2008, though the phasing-out had started in 2006 when international prices began an upward swing. Essar continued to slug it out in the market, and with global prices stabilising, it scaled up operations.
More From This Section
On June 25 last year, the government had announced decontrol of petrol prices.
The government also said diesel prices would be decontrolled. It limited the hike in diesel to Rs 2 per litre. The consequent losses on diesel was around Rs 1.70 per litre.
With the continued surge in crude oil and international product price, the loss for public sector oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — has jumped to Rs 7.
While petrol price has been raised several times since decontrol, the government has prevented OMCs to hike diesel price on inflation-related concerns.
While the government compensates state-owned OMCs for underrecoveries, private fuel retailers are not compensated for the same and consequently they are failing to compete with their public sector counterparts.
Private companies had also filed a petition before the Petroleum and Natural Gas Regulatory Board against OMCs, accusing them of “predatory pricing” in transport fuels. They had appealed to the board to levy a penalty on these companies. The board is yet to decide on the case.