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Richa Mishra

New Delhi, Nov. 11 Reliance Industries Ltd (RIL) will continue to tread cautiously on domestic retail fuel business. This is inspite of the softening of global crude prices.

Meanwhile, another private sector player, Essar Oil, which follows a franchisee model, has already restarted its fuel retail business. Reliance mainly follows a company owned company operated and company owned dealer operated business model.

A small percentage of RIL retail business is through dealer owned dealer operated model. “RIL is observing the situation closely and will take a decision at an appropriate time,” company officials told Business Line.

In March this year, RIL closed over 1,400 petroleum retail outlets across the country. Private retailers, such as Essar and RIL, had suffered heavy losses on their retail businesses and suspended operations due to the disparity in international crude prices and retail selling price as well as absence of a level playing field with public sector oil marketing companies.

Petroleum products were offered by the public sector companies at subsidised price as Government has put a cap on the retail selling price of auto fuels to be sold by these entities.

The move to suspend retail business was started in March-April 2007. However, the company continues offer a compensation package to its dealer network.

“From August we had re-started our outlets. The total outlets were 1,250, out of which the company has already started operating 475-480. By the end of the month we expect to operationalise almost 750-800 outlets and by December the target is to operationalise almost 1,000,” an Essar official said.

However, industry sources said if the crude continues to be below $65 a barrel, it will provide private players a level playing field as compared to public sector companies and help them break even.

The Government extends package to public sector oil marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation – for selling auto and cooking fuel below the cost price. A similar compensation package which comprises oil bonds is not available for private sector.

According to Essar official, today the differential has come down in the range of Re 0.50 to Re 1 on petrol and diesel. Earlier, the price differential with the PSUs was Rs 22/litre on diesel and Rs 16 on petrol.

Crude oil prices have dropped from a record of $147 a barrel in July to now hovering around $60-65 a barrel. India’s crude oil basket Monday stood at $56.09 a barrel. The basket on Friday had touched an all time low of this fiscal at $54.92 a barrel. The Indian basket has averaged $57.74 a barrel in November so far, down early 16.5 per cent from October’s average of $69.12.

More Stories on : Petroleum | Outlook | Retailing | Reliance Industries Ltd

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