Write your abstract here.: Reliance Industries, the country’s largest private sector company, has decided to
shut down all the petroleum retail outlets owned by it directly as
surging crude prices and the absence of government subsidies have made
operations unviable. It has become unviable to transport fuel from
our depots to retail outlets as the throughput from our retail outlets has
almost become zero.
RIL operates about 1,400 retail outlets. It owns
most of these outlets after it decided to buy out several outlets being
operated by the dealers. the outlets operated by the dealers will
continue to function. RIL achieved a fair amount of success in the petroleum
retail market, gaining a market share of over 14% in no time.
RIL’s outlets were selling almost four times the average sales of PSU outlets till
May 2006. The sales volumes of RIL outlets fell significantly after the price
increase. Over 50 lakh customers who had been patronising RIL outlets — known
for their quality and quantity assurance — switched to other outlets. The price differential between private and
public companies kept widening because of oil bonds for state-owned oil
marketing firms and discounts from upstream oil companies. At present, RIL sells
petrol and diesel at between Rs 6 and Rs 14 more than PSUs. This drove away
customers, forcing the pumps to go dry.
Even with this differential, RIL is incurring substantial losses in retail marketing. Further, this in turn
has affected the operations and consequent revenues of the company. Its market
share, which stood at 14%, has dropped to nil after the price differential with
RIL, along with other private sector firms like
Essar Oil and Shell, is lobbying hard for equal treatment with OMCs, including
access to oil bonds issued by the government to underwrite the subsidy cost of
selling petroleum products at a concessional price.
Reliance and Essar make huge losses on selling petrol and diesel at prices
higher than Indian Oil, Bharat Petroleum and Hindustan Petroleum. On an
average, fuel at private outlets is costlier by Rs 4 to 5 a litre than the PSU
Public sector retailers too lose Rs 10.93 on sale of every litre of petrol
and Rs 14.66 per litre on diesel but the losses are made up by issue of oil
bonds by the government and discounts from ONGC, GAIL and Oil India.