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New Delhi, July 14 The public sector oil marketing companies (OMCs) that are facing pressure on their profitability due to selling petroleum products below the cost price, have been asked by the Government to stop indiscriminate expansion of auto fuel retail outlets in the country. The OMCs suffer heavy under-recoveries on sale of petrol, diesel, cooking gas and kerosene as the retail selling price of these products are not in tandem with the volatility in global crude prices.

A Petroleum Ministry official told Business Line that “there is no restriction, but from time to time we have been advising companies not to indiscriminately open retail outlets as unviable dealership results in a variety of malpractices including adulteration, short selling.”

The public sector companies IOC, BPCL and HPCL have decided to go slow because of the financial constraints they face, oil industry sources said. BPCL currently has 8,500 retail outlets, HPCL 8,400, and IOC nearly 17,000. “We have decided not to put out any new advertisements for retail outlets till further advised. The companies will approach their respective boards with their retail plans,” an industry official said. However, they will continue with those already under construction and those being planned at strategic locations. “The number of such outlets is very negligible,” a senior IOC official said.

The under-recovery suffered by OMCs as on July 1 on petrol was Rs 14.92 a litre, diesel Rs 25 a litre, kerosene Rs 38.09 a litre and cooking gas Rs 338.53 a cylinder — despite the price hike of petrol and diesel last month. The Indian crude basket on July 11 stood at $140.87 a barrel. The OMCs were losing Rs 715 crore a day and the estimated revenue loss for 2008-09 is Rs 2,11,400 crore.

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