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Fuel retailing regains appeal

New Delhi, June 2: Private players such as Reliance and Essar are taking a renewed interest in fuel retailing with the new government continuing with the monthly increase in diesel prices that will see under-recovery falling below Rs 3 per litre.

State-owned refiners hiked diesel price by 50 paise, excluding state levies, on Saturday. This is the first hike by the newly formed BJP-led government.

The increase along with the appreciation in the rupee against the dollar has helped to trim losses on diesel sales to Rs 2.80 a litre from Rs 4.41 a litre last week, officials said.

Analysts said the government was in a position to decontrol diesel prices because of the rupee strengthening against the dollar. Diesel accounts for 44 per cent of the country’s fuel consumption and petrol 10 per cent. With petrol already decontrolled, the free pricing of diesel will mean more than half of the fuel consumption will be at market prices.

In January 2013, the previous UPA government had decided to raise diesel prices in small doses of 40-50 paise a litre every month till the losses, which are compensated through subsidy, are completely eliminated.

Industry sources said private players such as Reliance Industries and Essar were finalising plans to re-open their fuel outlets as diesel deregulation could be a reality in the next six months.

“The company is reviewing its retail strategy to tap the growing gasoline demand by additionally targeting city centres for new outlets,” a senior Essar official said.

In a research note, ICICI Securities said while the outgoing UPA government had taken baby steps towards freeing diesel, “a clear majority should encourage the government to fast forward deregulation through more frequent hikes”.

Private companies had garnered about 16 per cent market share in diesel after the sector was opened up in 2002. However, they shut most of their outlets after government control on fuel prices was restored allowing state-owned retailers to sell at cheaper rates.

Meanwhile, R.K. Malhotra, the senior most director on the board of Indian Oil Corporation, has been given additional charge as chairman, following the retirement of R. S. Butola.

 
 
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