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Diesel draw: RIL trying to woo back retailers

Retailers in Gujarat said the company was offering commission of 0.5 paise and 0.75 paise on the sale of diesel and petrol, respectively

Kalpana PathakVinay Umarji Mumbai/ Ahmedabad
Seeking to cash in on the fact that diesel prices are close to the market rate, Reliance Industries Ltd (RIL) is trying to arrive at an understanding with its dealers for selling the automobile fuel.

RIL's Gujarat-based fuel retailers said the company was readying a fuel retailing policy, to be presented to dealers in 20-25 days. This will cover issues ranging from dealer commission to the price at which the automobile fuel will be sold.

RIL and state-run Hindustan Petroleum Corporation Ltd (HPCL) have been in talks for a possible tie-up to further their fuel-retailing plans. "RIL told us it would sell fuel at the same rate as that of oil marketing companies. We have been told it will take a cue on fuel pricing from its partner HPCL. Though RIL has made promises, we will not open the outlets till we are convinced of making profits," said an Ahmedabad-based fuel retailer.

 

Retailers in Gujarat said the company was offering commission of 0.5 paise and 0.75 paise on the sale of diesel and petrol, respectively. They, however, added this was much less than what oil marketing companies (OMCs) --- IndianOil Corporation, Bharat Petroleum Corporation and HPCL --- paid. "OMCs offer us a commission of Rs 1.15 a litre on diesel and Rs 2.01 on petrol. We have been demanding if not higher, the commission offered by RIL should at least match that of OMCs," said an Ahmedabad-based fuel retailer of RIL.

Retailers added in the wake of the company charging a premium of 50 paise to Re 1 over and above what the OMCs charged for the fuel, they might find it difficult to record good footfall at their outlets. "Essar, too, offers a 50 paise discount over the OMCs? fuel prices?We will have to work harder to sell fuel, as consumers prefer fuel retailing outlets of OMCs," said another fuel retailer of RIL.

RIL did not reply to an emailed questionnaire sent last week. A senior company official confirmed the company was in discussions with fuel retailers to reopen its retail outlets, but declined to discuss the specifics of commission being offered, as well as the price at which RIL would retail its fuel.

On Monday, crude oil prices plunged to $99.36 (Rs 5,995) a barrel, the lowest in 14 months. Softening crude oil prices and regular monthly price increases have led to a fall in the underrecovery on diesel. Last week, the petroleum planning and analysis cell under the petroleum ministry had said the underrecovery on high-speed diesel for the first fortnight of September would be Rs 0.08 a litre, against Rs 1.78 a litre for the second fortnight of August.

Since January 2013, diesel prices have been raised up to 50 paise a litre, every month. So far, rates have cumulatively risen Rs 11.81 a litre in 19 instalments.

Petrol prices were market-linked in June 2010.

In July, RIL had begun gauging its dealers' preparedness and willingness to reopen its 1,400-odd fuel retailing outlets in the country. Retailers say RIL has decided to reopen company-owned, company-operated pumps first and spend Rs 50 lakh on renovating these.

About 150 dealer-owned, dealer-operated or company-owned, dealer-operated outlets would be reopened at a later stage.

RIL's share in the fuel-retailing business is less than 0.5%.

The company had shut its fuel retail outlets in May 2008, owing to mounting losses, as it was selling fuel at rates much higher than the subsidised prices of state-owned oil companies.

In 2010, about 75 fuel retailers in Gujarat had decided to exit the RIL dealership and sought reimbursement for their investments. The dealers had said they had invested Rs 2-4 crore in each outlet --- the cost of the land was Rs 1.5-3 crore, while running services at the outlets cost Rs 30 lakh-1 crore.

 

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First Published: Sep 09 2014 | 8:52 PM IST

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