Essar Oil's retail outlets facing supply crunch

Essar Oil will continue to build new retail outlets but will not commission them till it is profitable for the company to run them.

Addressing shareholders at Jamnagar refinery project site at Vadinar on September 30, K N Venkata Subramanian, president of Essar Oil, said, "As for new outlets, we will continue to ensure that they are built on time and commissioned at an appropriate time."

Subramanian told shareholders, "The government's reluctance to compensate marketing companies for the increase in crude prices has put us in great difficulty."

He said the company was the only one in the sector which was purely a marketing company.

It was losing money on every litre of petrol and diesel sold, as it had to buy products from the market or resort to importing. Essar Oil would do its best to keep supplies going to retail outlets. It has, however, curtailed supplies to franchisees after informing them that it would protect their commissions as well as their fixed costs.

Essar and IBP are the oil marketing companies in the country without their own refineries. As a result, it is losing around Rs 7 per litre of petrol and Rs 5 per litre of diesel owing to high refinery gate prices of products and fixed selling prices.

No member of the Ruia family was present at the annual general meeting of Essar Oil at Vadinar on Friday.

Talking about the company's plans to build a network to market petro products from its proposed refinery, Subramanian said, "We are preparing to be ready with a retail marketing network when supplies from our refinery start flowing."

Essar is expected to put its marketing network in place before the commissioning of refinery scheduled for April 2007.

Speaking on the progress of the refinery, Subramanian told shareholders, "By the time you are here next year for the next annual general meeting, we will be in a position to show you the initial products from this refinery. We expect that we will be able to complete the refinery marginally ahead of schedule."