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Private retailers selling transport fuel at higher rates

By Ajay Modi
September 11, 2010 03:26 IST
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After briefly maintaining prices at par with public sector oil marketing companies following the June 25 price hike, private fuel retailers Essar Oil and Reliance Industries are selling petrol and diesel at a premium of Rs 0.50 to 2.50 per litre in some states.

"After the price increase (on June 25), all our outlets had at par pricing for some time, but thereafter, differential pricing was introduced in few states. Currently, the price differential in these states is Rs 0.50 to Rs 2 per litre for diesel and Rs 2.5 for petrol," said an official at Essar Oil, which runs 1,343 retail fuel outlets.

A spokesperson at Reliance Industries confirmed the company was selling petrol and diesel at a premium in some states, depending on the distance from its Jamnagar refinery. Of its 1,430 retail outlets, the company is currently running around 680. The company is not keen to operate all outlets till the government decontrols diesel prices as well.

On June 25, the government had announced decontrol of petrol prices, which resulted in an increase of Rs 3.50 per litre. The government also said diesel prices would be decontrolled. It limited the hike in diesel to Rs 2 per litre. The state-owned oil marketing companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — continue to incur an underrecovery of around Rs 1.70 per litre of diesel.

While the government compensates state-owned oil marketing companies for underrecoveries, private fuel retailers are not compensated for the same, and that is why private players are unable to compete with their public counterparts. In fact, private retailers had to shut their outlets when crude oil touched a high of $147 per barrel in July 2008.  

The private companies also filed a petition against the public companies with the Petroleum and Natural Gas Regulatory Board, accusing the latter of "predatory pricing" in transport fuels. They had appealed to the board to levy a penalty on these companies. The board is yet to decide on the case.

While Reliance wants to play safe as far as expansion is concerned, Essar Oil has a different approach. It is hopeful that sooner or later the government will decontrol diesel. Accordingly, it is moving ahead with its expansion plans. It plans to take the number of retail outlets to 1,700 by the end of this financial year.

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Ajay Modi in New Delhi
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