Oil Ministry authorises new companies to sell auto fuels in the country

According to a top ministry official, a fresh marketing authorisation has been granted to Reliance Industries under these norms

The Ministry of Petroleum and Natural Gas has granted seven authorisations to companies for selling auto fuels in the country. These new approvals are under the relaxed guidelines for authorization to market transportation fuels that were revised in 2019. This is expected to make the competition more intense in India’s petroleum retail business.

According to a top ministry official, a fresh marketing authorisation has been granted to Reliance Industries (RIL) under these norms. This is being done as RIL’s existing Retail Marketing Authorisation has been transferred to its subsidiary Reliance BP Mobility (RBML). This was required since the Mukesh Ambani group has reorganised its petroleum to chemicals business. Another authorisation has been granted to RBML Solutions India under these new rules.

Chennai-based IMC (once called Indian Molasses Company), which specialises in oil terminals, also got the approval to sell auto fuels in the country. It had competed for a discovered small field project during the second bid round to explore and produce oil and gas from India. But IMC could not bag a project. It currently offers liquid storage for multiple ports in the country. IMC is known for storing petroleum products, liquefied gases, petrochemicals, acids and vegetable oils.

Assam Gas Company, a government of Assam undertaking, that is primarily engaged in the gas transportation business has got an approval for fuel retailing. According to the company website, it has a network of underground natural gas trunk and distribution pipelines that serves about 400 tea factories, 1,000 commercial establishments, about 31,000 domestic consumers and several big industrial consumers in the districts of Tinsukia, Dibrugarh, Sivasagar, Charaideo, Jorhat, Golaghat and Cachar in Assam.

Newly-incorporated Onsite Energy has also got an approval for petroleum retailing in India. According to regulatory filings, it was incorporated in May 2020 and has two directors, Shilpa Shekhar Borhade and Anish Ajit Kunkulol. Regulatory filings say the company is involved in service activities incidental to oil and gas extraction excluding surveying. It is said to offer oil and gas field service activities on a fee or contract basis.

M K Agrotech and Manas Agro Industries and Infrastructure have also got fuel retailing authorisations under the new rules. M K Agrotech is part of a diversified conglomerate with interests across agricultural products such as sunflower oil, real estate, and crude oil and gas extraction. Manas Agro Industries and Infrastructure has its own brand of Liquefied Petroleum Gas (LPG or cooking gas) and has also collaborated with Essar Petroleum (now Nayara Energy) for supply of ethanol blended petrol.

These new authorisations were granted to companies having a minimum net worth of Rs 250 crore at the time of making application. In case authorization is required for both retail and bulk sales, the minimum net worth requirement was Rs 500 crore. According to the 2019 rules, for retail authorisation, an entity has to set up at least 100 retail outlets, out of which 5 per cent should be in the notified remote areas within 5 years of the grant of authorisation.

“Essentially, it is difficult for these new entities to work on a standalone basis, they will need back-end support from some company already having infrastructure. Since they are not into crude oil refining, they will have to depend on imports, and it will be hard for them to get the entire value chain in place from fuel import to dispensation point. So, they will have to tie up with some large company that has such an existing infrastructure in place. They will have to ride on bigger players,” B S Kanth, former Director (Marketing at IndianOil told Business Standard.

“Having got the license, even bigger players may be keen on tying up with them to leverage their experience. It is likely that collaborative entities will come about. These may come up in pockets and not on a pan India basis,” he added.

India’s fuel demand has rebounded from COVID-19 pandemic lows and it expected to report positive growth over last year. Around 90 per cent of the country’s fuel retailing outlets are currently owned by public sector undertaking companies. The remaining market is largely dominated by RIL and Nayara Energy.