Govt reviewing norms for retailing of petroleum products

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Richa Mishra

New Delhi, Nov. 20

THE Petroleum Ministry is reviewing the existing norms for the retailing of petroleum products, including the investment criteria prescribed for new entrants.

Since the retailing business in the petroleum sector was opened up by the Government on April 1, 2002, the Petroleum Ministry has granted marketing rights to Reliance Industries Ltd for close to 5,849 outlets, Essar Oil (initially 1,700 outlets), Shell (2,000), Oil and Natural Gas Corporation (600 outlets) and Numaligarh Refinery Ltd (510 outlets).

However, it was noticed that the companies have lagged behind in setting up the desired number of retail outlets, a Government official told Business Line. This has prompted the Ministry to review the norms. The Ministry is examining whether the minimum investment criteria of Rs 2,000 crore for companies proposing to enter the transportation fuel (petrol and diesel) marketing business has served any purpose or could be lifted, the official said.

As per the criteria, those seeking permission would have either invested or committed to invest the sum in the petroleum sector over a 10-year period. The Ministry is also considering a time frame for the companies who have obtained the licence to set up retail outlets.

Currently, Indian Oil Corporation continues to be a dominant retail player with almost 11,000 outlets (excluding IBP). The IndianOil-IBP combine has about 15,000 outlets. Bharat Petroleum and Hindustan Petroleum also have a significant presence.

Besides, the Planning Commission pointed out that the distribution and retailing of petroleum products and natural gas are dominated by the Central public sector undertakings.

The Commission felt that alternatives for bringing private sector efficiencies to distribution and retailing need to be explored.

"One possibility could be to lower the Rs 2,000-crore investment barrier for the right to market transportation fuels... " the Commission observed in the mid-term appraisal of 10th Five Year Plan (2002-07). It also opined that the marketing companies are making pre-emptive investments by setting up a number of retail outlets.

"The viability of these outlets needs to be examined. A sub-optimal pattern appears to be emerging with each company planning to set up a retail network that primarily absorbs its own output. This phenomena will be addressed once real competition emerges in marketing of petroleum products," the Commission said.

(This article was published in the Business Line print edition dated November 21, 2005)
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