The government officials have floated a proposal to curb the dominance of Indian Oil Corporation (IOC) in petroleum fuel retailing, after a strike in January by employees of the government-run company led to a countrywide shortage.
The proposal is to redistribute some of the over 17,600 petrol pumps of IOC, the largest fuel retailer that controls about 50% of the market, between fellow public sector firms such as BPCL and HPCL in such a way that each will have an equal marketshare.
The proposal was discussed at a meeting of secretaries while defusing the national fuel crisis, which arose due to the strike by the staff of public sector oil companies.
There was a shortage of petrol and diesel across the country, mainly due to the striking IOC officials. Supply of petrol and diesel was disrupted in many parts of the country between 7 - 9 January 2009 due to the strike.
Retail fuel market
Fuel retail in India is the monopoly of three state-owned oil companies — IOC, BPCL and HPCL.
Vehicle-owners had queued up at over 8,300 pumps of HPCL, which had not participated in the strike. Private oil companies are expected to gain from retail fuel market rejig.
The idea to re-organise the retail fuel market is also aimed at increasing competition, which would bring some relief to private oil marketing companies like Essar, RIL and Shell India, which have failed to make much of a foray, thanks to the skewed pricing structure.
The proposal is also significant in light of the recent talk in the market that IOC is considering an offer of RIL to operate its petrol pumps. RIL has approached IOC and HPCL for a tie-up to revive its fuel retail business.
Due to unequal competition with pumps of PSU oil companies, RIL had closed all its 1,433 retail outlets in April 2008. It is said that HPCL has no intentions to tie up with RIL for its retail operations.
IOC officials confirmed the RIL proposal, but did not offer any comments.
We remain NEUTRAL on Oil Marketing Companies (OMCs), viz. IOC, BPCL and HPCL.