The Hindu Business Line : Reliance Ind to shut down 900 fuel retail outlets

Pricing woes
Essar and Shell, the other two private players, continue with retailing business for now.
RIL suffered losses despite selling petrol and diesel at prices higher than the PSU retailing companies.

Our Bureau

New Delhi, March 25 Unable to compete with the subsidised price of public sector oil retailing companies, Reliance Industries Ltd (RIL) has decided to shut about 900 of its 1,400 petrol stations the company in the next few weeks.

While the public sector oil retailing companies – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation (which sell auto fuel below the cost price) – are compensated by the Government for their revenue losses, similar mechanism is not available to the private sector players. This makes the oil retailing business unviable for private sector players, industry sources said.

However, the other private sector player Essar Oil which has 1,280 petrol stations is not closing operations as yet, so is Shell which operates a small number of outlets in the southern India. Essar follows franchise system for its retail business.

Reliance has three categories of retail outlets – company owned company operated (COCO), company owned dealer operated (CODO), and dealer owned dealer operated (DODO). The company has sent internal mails for a phased closure of the first two categories while a communication for the third category is likely to be sent next month, industry sources said. The company plans not to replenish petrol and diesel stocks once the existing lot at its retail outlets get exhausted.

The private sector major, which runs the country’s biggest refinery, set up a number of retail outlets after the Government opened up the sector and cornered over 14.3 per cent of the market. But it lost its position after the Government did not allow public sector oil companies to raise retail prices in line with soaring crude oil prices.

Losses incurred

RIL suffered losses despite selling petrol and diesel at prices higher than the PSU retailing companies. On an average, petrol from Reliance outlets were priced between Rs 4 and Rs 5 a litre higher than public sector companies retail outlets.

Despite selling at higher price Reliance was losing Rs 3.4 a litre on petrol and Rs 5.8 per litre on diesel. Public sector oil companies, which lose Rs 10.93 on sale of every litre of petrol and Rs 14.66 per litre on diesel, are however compensated by the Government. Reliance spokesperson was not immediately available for comments.

The company had invested about Rs 4,000 crore in setting up close to 1,400 retail outlets.

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