Higher prices squeeze sales and operating costs

Our Bureau

Mumbai, Aug 2

Reliance Industries Ltd has said that it has increased diesel margins for its dealers and will also take steps to bear some of their loan interest costs.

The company's announcement came after there were indications on Wednesday that many of its dealers were readying for a nationwide strike.

"RIL has taken adequate steps to ensure short-term relief for its channel partners. These include waiving network usage charges and substantial increase in diesel margins," said the company in a statement, while not specifying the quantum of margin increase.

The company has agreed to bear interest costs on retailers' loans for three months and has even negotiated with banks to re-schedule loan repayments, said the statement.

RIL empathises with its channel partners and is doing everything possible to ensure their wellbeing, even as a long-term solution to create a level playing field in the petroleum-marketing sector is awaited, said the statement.

Decreased sales

The company has for some time now been stressing on the fact that government-sponsored subsidy has left out the private sector oil companies.

RIL retails its fuels at higher prices compared to the public-sector companies, with the result that its dealers are facing decreased sales and now want increased margins to offset the dip in sales.

"Partially, to part compensate the losses thus incurred due to absence of a level playing field, Reliance Industries Limited (RIL) increased the price of diesel by Rs 2.50 per litre over the rates offered by PSUs, who enjoy subsidy benefits. This increase, after accounting for a higher dealer commission and state and central levies, is equivalent to less than a quarter of the subsidy provided to PSUs by government of India," said the statement.

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(This article was published in the Business Line print edition dated August 3, 2006)
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