The Telegraph
Tuesday , September 2 , 2014
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Private firms warm up to fuel retailing

New Delhi, Sept. 1: State-run fuel retailers are likely to face competition from private players such as Reliance and Essar with the under-recovery from diesel sales dropping to 8 paise per litre.

Under-recovery, or the gap between retail selling price and the cost of import, has fallen to 8 paise per litre, helped by the monthly hike in prices and the softening of international oil rates, an official statement said.

If the trend continues, diesel price will be on a par with international rates by next week, eliminating the need for the next hike due on October 1. This is the first time in over a decade that the prices at retail outlets are almost in line with imported cost of the country’s most consumed fuel.

Essar Oil plans to more than double its 1,400 retail outlets to 3,000 in the next three years to capitalise on the de-regulation of the diesel sales. “Essar Oil has about 1,400 retail outlets across the nation, with over 300 in various stages of commissioning. We are now working to restart diesel sale from our retail outlets in phases,” company officials said.

Sources in Reliance Industries, which had set up around 1,100 pumps, said they would wait till the deregulation before taking steps to re-open the outlets. “Let the deregulation happen and let us see how the government goes about it. We need to have clarity whether market prices will continue if the global crude prices go up because of the tensions in West Asia or subsidy will again come into play,” they said.

Private companies such as Reliance and Essar had garnered about 16 per cent market share in diesel after the sector was opened up in 2002.

However, they shut down most of their outlets after the restoration of government control on fuel prices, which allowed PSU retailers to sell at a cheaper price because of the subsidy.

Oil ministry officials said they would soon move the cabinet to deregulate the diesel prices once parity is established. “For a final decision (on deregulation) it has to go to the cabinet. The January 2013 decision was silent on whether the prices will be deregulated after they reach parity,” officials said.

Since January 2013, diesel prices have been raised every month by up to 50 paise per litre to trim the losses.

Rates were last raised on August 31 after which losses had dipped.