New Delhi: Reliance Industries has shut all of its 1,432 petrol pumps in the country after sales dropped to almost nil as it could not match the subsidized price offered by public sector competition.
The company owned less than 3% of the 36,936 petrol pumps in the country. Of the total retail outlets, state run Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) own 34,304 pumps, while the remaining belong to private sector Essar Oil and Shell India.
“Reliance has informed that sales at their retail outlets was negligible due to selling price differential between private and public sector ROs, leading to the closure of all their 1,432 pumps in the country with effect from 15 March,” Petroleum Minister Murli Deora informed the Rajya Sabha on 6 May.
Public sector currently sell petrol at a loss of Rs13.97 a litre and diesel at a discount of Rs20.97 per litre. This revenue loss is made up by the Government through issue of oil bonds and subsidy share from upstream firms like ONGC and GAIL.
Private firms such as Reliance were not entitled for the subsidy and priced fuel from their pumps at Rs8-10 a litre higher than public sector competition, leading to fall in market share.
“The price of sensitive petroleum products are fixed by the public sector oil marketing companies in consultation with the Government,” Deora said. “Private oil companies are not subject to pricing restrictions by the Government and are free to take their pricing decisions on commercial considerations,” he added.
However, Essar Oil and Shell India have not closed their petrol pumps, he said.
Gujarat had the highest number of Reliance pumps at 246 outlets, followed by Maharashtra (160), Uttar Pradesh (132), Andhra Pradesh (129) and Rajasthan (107).
Deora said IOC, BPCL and HPCL plan to set up 1,830 more petrol pumps in the country during 2008-09 fiscal.
The gross under-recoveries of the state-run retailers on sale of petrol, diesel, domestic LPG and kerosene in 2007-08 are estimated at Rs77,303 crore, he said.
The Government issued oil bonds to IOC, BPCL and HPCL worth Rs20,333 crore and upstream oil companies contributed Rs15,873 crore to partially compensate the under-realisation for April-December period.
“For the same period, the impact absorbed by the oil companies after the issue of bonds and subsidized by the upstream oil companies, is likely to be Rs11,413 crore,” he added.