Financial Daily from THE HINDU group of publications
Saturday, Jul 05, 2003
Industry & Economy - Petroleum
Marketing - Retailing
Move to ease curbs on PSU marketing cos Govt mulls short-term oil dealerships
Balaji C. Mouli
NEW DELHI, July 4
IN a bid to ease the restrictions on public sector oil marketing companies setting up retail outlets for selling petrol and diesel, the Government is considering a proposal to amend the policy on retail outlets that are owned as well as operated by the PSU oil marketing companies.
With a Government ban on appointment of permanent dealers for retail outlets, the Petroleum Ministry is now planning to allow contractors to operate new retail outlets on a short-term basis for a year or two. This follows a meeting between the Petroleum Secretary, Mr B.K. Chaturvedi, and the public sector oil marketing companies, held on Wednesday this week.
If approved, it will give the PSU marketing companies a shot in the arm as they are currently losing plum retail outlet sites to private sector oil marketing companies. This is because the private sector outfits are offering firm dealerships to the retail site owners, thus offering a long-term permanent source of income beyond the one-time sale of land.
"Land owners look beyond the one-time sale of land. If we can offer them short-term dealerships as a contractor, they would be induced to sell the land to public sector companies. This, in the hope that once the ban on dealership is removed, they would stand a good chance to become dealers on account of their newly-acquired experience," a senior oil company official said.
"The Company-owned-Company-operated (CoCo) option is not sustainable on a large-scale since the cost of employing our own personnel to man the outlets is high," the official said.
The Government ban on appointment of dealership, imposed in February this year, followed the uncovering of the petrol pump scam in August last year involving 417 cases of politically connected allotments. The ban, however, did not apply to private players such as Shell, Essar and Reliance, leading to the public sector oil companies crying foul over the ban.
"We have suffered heavily on account of this discrimination. In a good year, we set up around 350 outlets. However, last year, we set up only 220," a senior Indian Oil Corporation (IOC) official said.
The delay in lifting the ban on appointment of dealership is purely political in nature. The reason for the delay in taking a decision is not far to find - over one in four dealers belong to the reserved category.
Of the 19,049 retail outlets operating today, which are entirely in the public sector fold, around 5,078 outlets or 26 per cent are in the reserved category. Caught on the one hand with the political compulsion to retain control over the appointment of dealers and, on the other hand, the prospect of providing a non-level playing field to the public sector oil companies vis-à-vis private companies in expanding retail networks, the Government has decided to weigh the option of the short-term solution of allowing dealership on a short-term basis involving purchase of land by the public sector oil companies.
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