Shell arm seeks nod for bigger trucks to transport fuel

Shell India Marketing, which runs the retail operations of Shell, has sought the central government's permission to increase the carrying capacity of its trucks to economise the operating cost of running its petrol pumps.

An official told Business Standard that the company had asked the government for permission to transport petrol and diesel in trucks with a carrying capacity of 40 kilolitres, twice the size of the permissible capacity of 20 kilolitres. The company is awaiting the government's response.

Shell India Marketing faces a challenging situation in controlling operating costs because it transports petrol and diesel from Mangalore Refinery and Petrochemicals (MRPL) to Bangalore and Chennai by road to service its three retail outlets in India, two in Bangalore and one in Chennai.

In Chennai, for instance, petrol pumps run by other companies source fuel from Chennai Petroleum's refinery that is located in North Chennai. Shell, which started operations last November, has been able to sign a sourcing agreement with only MRPL.

A Shell official said that the group used trucks with a carrying capacity of 40 kilolitres in other countries. Trucks with higher capacity would mean that fewer vehicles would have to make the round trip from Mangalore to Chennai ferrying fuel.

Shell has received government permission to open 2,000 retail outlets. A condition attached to the government approval has made it necessary for Shell to own or lease the land on which the petrol pumps are located.

The pumps are managed by a retailer whose commission is linked to the volume of fuel sold.

Shell has followed its global practice with respect to securing the safety of fuel stored in the pumps, and has imported dispensers from Japan. One consequence is that "average investment is a bit high compared to existing pumps," said Shairan Husian, managing director of Shell India Marketing.

Husain declined to disclose the company's current investment in retail operations. Future investment would be done in phases, he said. Around the time, the company kicked off retail operations, it indicated that Rs 250 crore would be invested in the first stage.

Shell's expansion plans are dependent on the speed with which it can acquire land for petrol pumps, said Husain. Another key factor in the expansion plans are the sourcing agreements that it can come up with.

Husain said that it would make commercial sense to source fuel from local refineries. If the company is unable to find more suppliers, it would have to source fuel from its refineries in East Asia and Middle East.