Shell closes 20 retail outlets, says part of 'network planning'

Shell India, which was looking to sell 20 retail outlets last year, has closed 20 of its 81 retail outlets. Shell, the Indian arm of Royal Dutch Shell Plc, is the only foreign operator present in the domestic fuel retail business.

It has retail outlets in six states—Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra, Gujarat and Assam. Most of these closures have been in Maharashtra and Tamil Nadu.

The Petroleum Planning and Analysis Cell, a wing of the petroleum ministry to analyse trends in petroleum products, said in its August industry review: “Shell has started decommissioning retail outlets and is scaling down retail business. So far, it has decommissioned 20 outlets.”

A company spokesperson claimed the closure was a part of Shell’s network planning and the company had bought some new sites this year to set up new outlets.

“We are growing our small presence slowly, keeping pace with the market as it opens up to embrace competition. Our network planning efforts see some sites closing and others opening. The net effect is growth,” he said.

In July 2004, Shell India had acquired a marketing licence from the government to set up a network of up to 2,000 fuel retail stations.

Last year, the company managed to sell few outlets. Government-owned IndianOil and Bharat Petroleum had found the offers expensive.

Private sector fuel retailers, Essar Oil, Reliance Industries and Shell, do not have a level playing field vis-a-vis state-run companies — IndianOil, Bharat Petroleum and Hindustan Petroleum. The price of diesel is regulated and government companies are compensated, while private retailers are not compensated.

Petrol was deregulated in June last year. However, with diesel still under control, private retailers end up incurring losses.

The differential treatment and consequent losses had forced Reliance to significantly scale down its retail business. The private sector has been unable to compete with the government-owned companies, who dominate the fuel retail business, with over 90 per cent share.