The Hindu Business Line : RIL cuts petrol, diesel prices by Re 1 a litre

Within just 12 days of reducing prices of petrol and diesel sold through its retail outlets, Reliance Industries Ltd (RIL) has once again cut prices of the two products by Re 1 a litre.

However, the price of Reliance petrol and diesel would still continue to be marginally higher than the public sector products by about 50 paise to Re 1 in most of the States (depending on the tax structure), except in Gujarat where it has reached parity in case of diesel.

The company has also decided to continue with the compensation package it had offered to its dealers of petroleum products, when its sales had taken a hit due to selling the products on market price.

With the softening of the international crude prices, RIL had from October 1 cut down the price of these products by Re 1 a litre. The company has further reduced the prices on Thursday, thus, bringing them close to the prices offered by the state-owned oil marketing companies, sources told Business Line.

The company, which has about 1,300 retail outlets across the country, had come out with a compensation package for its dealers who had gone on a token strike as they were unable to sustain operations due to fall in sales. The RIL retailers were selling their fuel at prices closer to market rates, which were higher than the prices of PSU outlets, leading to a reduction in sales.

RIL, which had priced fuel at Rs 2.50 per litre higher than PSUs, has seen diesel sales plummet almost 90 per cent between April and September, and petrol almost 50 per cent, thus, bringing down its market share. This also meant that the losses suffered by private operators were transferred to the books of the PSUs who are now selling a higher share of products.

Option for dealers

In order to address the dealers' concerns, the company had recently given two options. Under the first option, the dealers would continue to sell petrol and diesel at the retail outlets irrespective of economies of business, with RIL support coming in the form of additional margin over and above the normal margin available to them.

At a pricing differential of Rs 2.5 per litre on diesel and petrol, the additional margin would be Rs 500 per KL of diesel and Rs 400 per KL of petrol sales. This additional margin will vary in line with the price differential maintained by RIL with the nearest PSU outlet, sources said. The company has also proposed waiver of network usage charges.

Under the second option, the dealers have been offered a special support if they opt for suspending sale of petrol and diesel at the retail outlet despite the first option. The company offered to provide a 12.5 per cent return on investment and on the security deposit.

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