Mumbai: Reliance Industries may propose to sell or lease out its 1,432 petrol pumps to Indian Oil Corporation even as it will start reopening the outlets that were shut a year ago, from Monday.
Reliance may propose to transfer its petrol stations into a joint venture company run by the state firm, a source said. “The company had invested about Rs5,000 crore in setting up the retail network and it does not make sense for it to keep them idle,” he said.
Partnership with IOC would help the company overcome the handicap of not being able to use fuel from its two refineries at Jamnagar in Gujarat because they have been converted into only-for-exports units. Also, it would enable the pumps to avail of subsidy if the government doesn’t free fuel pricing and international oil prices bounce back.
But IOC has not yet taken a view on the fillers sent by Reliance, the source said.
A Reliance spokesperson did not return call made to get company comments.
The company, at the same time, is buying petrol and diesel from refiners like IOC and Ruias-owned Essar Oil to reopen its petrol pumps in phases.
“The company has started removing the protective gear put around dispensing units when the petrol pumps were shut in March last year. From Monday (March 16), it will start selling petrol and diesel from some of these,” a source said.
To begin with, outlets in Gujarat and Maharashtra will be reopened. Reliance will buy petrol and diesel from Essar to fuel its outlets in Gujarat.
“The most important factor aiding the reopening is the positive margins on fuel,” the source said.
Public sector firms like IOC, Bharat Petroleum and Hindustan Petroleum are selling diesel at a profit of Rs4.04 per litre over the imported cost. Private firms can capture a good market share by selling fuel a tad below the PSU rates and even then make handsome profits.
Essar, which used the sliding oil prices since October 2008 to reopen about 1,200 out of its 1,290 petrol pumps and is planning to add another 1,500 in next one year, is selling diesel at Rs0.45 to Rs0.50 a litre lower than PSU rates. On an average its outlets are clocking about 100 kilolitre a month fuel sales, 80% of this is diesel.
However, margins on petrol are just Rs0.33 a litre but diesel being the most used fuel and comprises of most of the volumes sold by outlets on highways, where most of Reliance petrol pumps are.
Reliance had recently written to the three state fuel retailers IOC, BPCL and HPCL seeking partnership to revive its petrol pumps.
It had shut all of its 1,432 petrol pumps in the country a year ago after sales dropped to almost nil as it could not match the subsidised price offered by public sector competition despite rising cost of crude oil.
IOC, BPCL and HPCL get bonds from the government and discounts from crude producer ONGC for selling petrol, diesel, domestic LPG and kerosene below cost.
Reliance is now using fuel from other refineries to reopen these outlets as the only-for-exports status for both its refineries at Jamnagar in Gujarat makes it prohibitive for it to sell fuel domestically.
Jamnagar-1 is an Export-Oriented Unit while Jamnagar-2 is an SEZ refinery. The EOU status of 660,000 barrels per day Jamnagar-1 will end in March 2010 and supplying fuel domestically from it would attract double excise and customs duties, jacking up rates by Rs9-10 a litre.
The source said the company had also written to PSU retailers on partnership in aviation business.
Reliance, which entered the high-growth aviation fuel segment in 2007 and has presence at 14 airports in India, may want an infrastructure sharing arrangement with the PSUs who are a dominant jet fuel re-fueller at airports.
IOC, BPCL and HPCL own aviation turbine fuel storages and hydrants at major airports and Reliance may want to share these to sell fuel to airlines.
Reliance has refuelling facilities at 14 non-metro airports and work at three other airports was in advanced stage of completion.
All major domestic airlines and few major international airlines (Emirates and Qatar Airways) have started refuelling from Reliance fuelling stations. It also operates a fuel storage and service facility at the Shamshabad international airport at Hyderabad in Andhra Pradesh.
The source said the company may want access to PSU facilities and barter fuel at some airports.
None of the three companies has till now shown any inclination for a partnership.