|
|
| |
Private retailers of petrol and diesel shut shop
Private and foreign companies had reckoned that retailing of transportation fuels -motor spirit and high speed diesel and aviation turbine fuel -would be a lucrative business in India. Thus they lobbied with the government to be allowed to set up retail stations to sell petrol and diesel. Many a corporate battle was fought over the eligibility conditions for grant of marketing rights. After years of deliberation, the government reluctantly granted marketing rights only to such companies that had invested Rs 20 billion in petroleum infrastructure. Thus Reliance and Essar, which had set up refineries, and Shell, which has set up an LNG import terminal, won the marketing rights for retailing transportation fuels.
All three announced ambitious plans to set up a nationwide network of petrol stations. Reliance invested about Rs 40 billion in setting up close to 1350 retail outlets for selling petrol and diesel in the country. Essar set up 1100 stations while Shell, which adopted a cautious strategy set up only 50 stations even though it had licence to open 2000 stations. Worried about the impending competition, the state owned oil marketing companies, which together had a network of 30,000 stations, began upgrading and modernising their stations.
|
|
However, the step rise in crude prices and the government's denial of subsidy to the private retailers on par with public sector companies, which get compensated by the government for selling fuel below the cost, has ruined the plans of Reliance, Essar and Shell. Reliance and Essar are finding it difficult to sell petrol and diesel at prices higher than Indian Oil, Bharat Petroleum and Hindustan Petroleum. On an average, fuel at private outlets is costlier by Rs 4 to 5 a litre than the state owned marketing companies' pumps. Thus what was supposed to be a lucrative business opportunity has turned into a loss making burden.
As a result the private retailers first announced that they would go slow on plans to roll out their network of retail stations. Next, as crude prices rose further, they announced that they would not set up any new retail station. Now Reliance has announced that it would shut down 950 company owned stations by end of April. The remaining 400 dealer operated pumps would continue to operate. Shell has announced that it will not set up any more stations. It wants a level playing field, if compensation is given it should be given to all players.
What is surprising that Reliance and Shell did not wait to see the fate of the petition they have filed before the newly created The Petroleum and Natural Gas Regulatory Board (PNGRB) demanding a level playing field. After all even the Minister of Petroleum seemed sympathetic to the cause of the private retailers. Murli Deora has been quoted as saying. "You don't expect the government to give subsidy to (private retailers like) Reliance and Essar (Oil). But you also cannot expect them to be penalised," he said.
|
|
|
