The Hindu Business Line : RIL seeks level playing field for restarting petro retail biz

Pricing woes
RIL is looking for clarity on Government policy and for global crude prices to stabilise
The company was incurring a revenue loss of close to Rs 25 a litre on both petrol and diesel, before it shut down its 1,433 petrol pumps

Our Bureau

New Delhi, Jan. 13 Despite the softening of the crude prices, Reliance Industries Ltd (RIL) wants to tread carefully before it re-opens its petroleum retail business. The company on Tuesday asked the Government to free retail fuel pricing in order to create a level playing field between private and public sector oil marketing companies.

Speaking at the sidelines of the Petrotech 2009 conference, Mr P. Raghavendran, President of Reliance Refinery Business said, “Removal of Government controls is much more critical than a simple statement that the private sector can come in,” he said adding that “we will re-open our business only when we see a reasonable period of stability, when we do not have to shut down again. By period of stability, I mean when the Government comes out with clear policy and the international crude prices stabilise.”

Due to mounting differential in retail selling prices of petrol and diesel sold by Reliance and the public sector undertakings, the company had to shut down all its petrol pumps. As public sector undertakings sold products at subsidised rates, private retailers found it tough to compete. RIL was incurring a revenue loss of close to Rs 25 a litre on both petrol and diesel, before it shut down its 1,433 petrol pumps.

Though, with the fall in international crude oil prices, margins on both petrol and diesel have turned positive, and the other private player Essar has re-started its retail business, RIL still wants to take time. This is despite the Government expressing hope that with oil prices ruling low, capping of retail prices could be avoided, and the private sector would be encouraged to enter the fuel retail sector and compete with the public sector oil retailers.

Mr Raghavendran said that unless administrative controls were dismantled, there is always the possibility of the Government again capping the price of petrol and diesel for PSU retailersif the international crude oil prices move up. He said the Government should use fiscal measures such as duty cuts to moderate retail fuel price to the extent feasible.

When asked if the company preferred exports over domestic sales, he said, “we would always welcome a domestic market if there is a level-playing field. It is lack of clarity in policy, which is holding us back. The fuel retail market was not commercially viable when the prices could not be predicted on a month-to-month basis.”

“We cannot predict the margin, cannot set the future prices and cannot predict cash flow. That is why the market capitalisation of public sectors is much less than it should be,” he added.

Another price cut

The Government is actively considering another cut in fuel prices. Petrol and diesel prices are expected to be cut at the same levels to that of December or even higher and also free fuel pricing from administrative control. Speculation is that the Government may reduce prices in the next Cabinet meeting.

While petrol price may be reduced by Rs 5 a litre, diesel may see a cut by Rs 3 a litre and domestic LPG by Rs 25 a cylinder. There is also a proposal to impose taxes on petrol and diesel.

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