The Hindu Business Line : Reliance, Essar fuel retail biz hit by petro price cut

Majors' initiatives
Reliance reduced prices of petrol and diesel to the PSU level in roughly 80-85 per cent of its 1,430 outlets.
Essar could match prices in merely 20 per cent of its 1,030 bunks

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Kolkata Feb. 16 The Government's decision to cut petrol and diesel prices by Rs 2 and Re 1, respectively has once again jeopardised the fate of auto-fuel retailing business of Reliance and Essar.

Keeping in tune with the fall in crude prices during the last three months, leading majors Reliance and Essar — sharing close to 2,500 outlets between them — had brought down the prices of fuel at their retail outlets to the PSU level in phases since October 2006. The effort resulted in regaining a part of the old volume.

Earlier, both the companies, priced their products above the PSU level at the peak of crude spike in the middle of 2006 and, as a result, lost market share.

However, on Friday, both the companies once again resorted to a mixed-price mechanism, whereby the price of their fuel was not matched to the PSU level in all parts of the country.

Reliance, the country's largest private retailer, reduced prices of petrol and diesel to the PSU level in roughly 80-85 per cent of its 1,430 outlets. The other private sector major Essar could match prices in merely 20 per cent of its 1,030 bunks.

According to sources, following Friday's revision petrol and diesel sold by RIL outlets in North Eastern States, West Bengal, Bihar, Chhattisgarh, Punjab, Uttarakhand (formerly Uttaranchal), Himachal Pradesh and parts of Madhya Pradesh and Maharashtra will be dearer by up to Re 1.

The company has roughly 15 to 20 per cent of its total outlets located in these States.

In West Bengal, for example, petrol and diesel sold by RIL have become costlier by 40 paise and Re 1, respectively compared to the prices in PSU outlets.

Prices were matched in the entire South and in most of the areas having high concentration of company outlets.

"We have tried to absorb maximum shock and match prices to the PSU level in larger parts of the country except in areas where freight costs were very high," a RIL official said.

Essar, which is yet to enjoy the cushion of refining margin, has reduced prices to PSU level in Karnataka, Assam, Gujarat, Maharashtra and the Union Territory of Dadra and Nagar Haveli accounting for 20 per cent of the total retail network.

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