Essar Oil for diesel subsidy to private companies on a par with PSUs

Essar Oil Ltd has demanded that it and other private fuel retailers be paid diesel subsidy on a par with their public sector competition to create a level playing field.

Essar Oil, Reliance Industries and Shell India are unable to sell diesel at their 3,000-odd petrol pumps as they cannot match the price offered by their predominant public sector competition.

State-owned Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp sell diesel at a Rs 15.55 per litre discount to the fuel’s actual cost. This difference is made up by the Government by way of cash subsidy.

Essar Oil Managing Director & CEO Lalit Kumar Gupta on August 6 wrote to the Oil Secretary G. C. Chaturvedi requesting to look at “feasibility of implementing a subsidy policy for private oil marketing companies as well, thereby ensuring that all the oil companies operating in the retail space are on the same platform.”

He said the Government can put a subsidy cap for each private retailer based on the national sale average of 120 kilolitre of diesel per month.

“The returns for sales tax payments submitted to the Government can be monitored to measure the actual level of sales. The subsidies can also be given as a set-off against this payment,” he wrote. “The cap will be limited to the sales tax amount paid by the private sector company on account of diesel sales.”

Essar Oil has 1,626 petrol pumps, of which it is currently operating 1,406 outlets. RIL has some 1,250 petrol pumps but it operates less than half of them because it is unable to match PSU prices.

While the Government has deregulated petrol pricing, it continues to control diesel rates.

Gupta said the Government may decide the level of subsidy to be given to both public and private companies at the time of the Budget itself. “Once the subsidy is fixed, the diesel prices could be deregulated and all the oil marketing companies can be given the autonomy to fix their own prices.”

Pitching for dual pricing of diesel, the company said fuel sold at retail outlets and to industry could be deregulated while direct sales to select consumers could be at a regulated price.

“Subsidy could be targeted towards specific consumers. Government could give direct subsidies to major consumers such as the Railways, State Transport Corporation, Army, etc,” Gupta wrote.

“For auto fuels, smart cards could be issued to the eligible customers and private transporters for claiming the subsidy separately.”

Also, premium/luxury diesel cars should be not be sold subsidised diesel, he said.

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