The Hindu Business Line : Details sought from private oil marketing cos on retail outlets

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New Delhi Feb. 2 The Petroleum Ministry has asked the private sector oil marketing companies to furnish data pertaining to setting up of oil retail outlets in remote/low service area.

While Reliance Industries Ltd (RIL) said that it was meeting the 11 per cent criteria, Essar Oil Ltd said initially it was meeting the requirement up to 8 per cent.

The companies interested in entering this segment of hydrocarbon industry were required to set up at least 11 per cent of their total proposed outlets in low service areas including remote/far-flung and hilly areas.

This criterion is based on the existing strength of the outlets in such areas. The Ministry seeks this data periodically, sources said.

Retail Plans

Speaking to Business Line, a senior Essar Oil official said: "When we started the business we were meeting the requirement up to 8 per cent initially. However, with the business taking a hit due to the retail price differential between the private sector and State-owned companies and the impact of volatility in the international crude prices, the company went slow on its retail plans. Now, with the situation stabilising the company has again started work on retail business and proposes to meet the 11 per cent target."

Despite these problems of mismatch between the product purchase price and the retail-selling price, the company is committed to the development of a countrywide retail network, he added.

Currently, Essar has 920 retail outlets and network for 1,100 outlets is ready. Essar is targeting 2,000 retail outlets by the end of the current fiscal year, which includes outlets in remote/low service areas.

Differential Prices

Asked about the price-differential, the official said, it still exists in the range of Re 1-Rs 2.5 per litre on motor spirit and high-speed diesel.

In places that are closer to refinery, the company was offering the products at the same price as the public sector oil marketing companies or lower, while the areas which are further, differential prices are more visible, he added. Essar Oil has also decided to give emphasis on the franchisee model in setting up retail outlets rather than the company-owned company-operated.

While maintaining that the volumes are slowly starting to come back in the business, the private sector players maintain that it is an uphill task. Essar official said, initially with 380-400 outlets the company was selling close to 50,000 tonne in March-April 2005.

Now, the company is selling 50 per cent of it (30,000-35,000 tonnes) with double the number of outlets (780 retail outlets).

Reliance Industries, which had seen the sales volumes dip to 500 kiloliters a day (in diesel), is now making six-seven times of that. The company saw its market share dip to 2 per cent from 12-13 per cent.

According to the company its market share has increased to 5 per cent now. RIL has been seeking a level playing field with the State-owned companies and has about 400 outlets in the pipeline.