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Reliance petrol pump owners left high & dry

Reliance petrol pump owners left high & dry
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First Published: Fri, May 09 2008. 12 17 AM IST
Updated: Fri, May 09 2008. 12 17 AM IST
Kolkata: Haji Muzaffar Ali Mollah is a mild-mannered man. But ask him about Reliance Industries Ltd, or RIL, and all the mildness vanishes.
“They’ve given us a raw deal,” alleges Mollah, whose petrol station in Maheshtala, in the southwestern suburbs of Kolkata, is one of the 1,432 RIL-run pumps to have closed down across the country.
The official spokesperson of the firm maintains RIL has merely stopped replenishing its outlets, and insists they have not been shut down. “We’ve merely suspended operations indefinitely and are not restocking the pumps,” he adds.
Reliance has done this because the petroleum retailing business in India is dominated by state-owned firms that sell petrol and diesel at prices lower than their cost of production. The government compensates them for this through oil bonds. Private firms that run petrol stations, such as Reliance, are not eligible for this compensation. In theory, they are free to sell at any price they deem fit but, in practice, they cannot charge more than what the state-owned oil marketing companies do.
Reliance’s distinction between “suspending operations” and closing down the stations is small comfort for Mollah, who has not only seen sales at his pump dwindling since last May, but has now been approached by RIL with a buyout offer which, he claims, adds insult to injury.
“Sales had stopped for the last month-and-a-half, and now Reliance is offering a price (for the pump) which is barely one-third of the market price for the land,” says Mollah, who claims to have invested around Rs2 crore in the outlet. He adds that he had spent almost Rs1 crore to buy the one-bigha (a third of an acre) plot, and Rs1 crore more on the design and infrastructure of the outlet as mandated by Reliance.
In early 2006, he had borrowed around Rs70 lakh from State Bank of India (SBI), India’s largest lender, at a discounted rate of 7.5%—3% below the bank’s prime lending rate (PLR) at that time—under a special scheme that RIL had worked out for its franchisees. Mollah is now unable to repay the loan.
SBI had lent to some 450 RIL petrol stations across the country, and 60 of them have already stopped repaying, says a deputy managing director of the bank who did not wish to be identified.
“But we aren’t worried because these pumps are sitting on prime properties. What is more, Reliance has assured us that these NPAs (non-performing assets or bad loans) will be regularized—it’s planning to buy out the pumps in distress,” the SBI executive told Mint.
Asked about RIL’s offer to buy out “pumps in distress” that have turned NPAs for lenders, the company spokesperson said RIL didn’t wish to comment on the issue.
Mollah, however, has spurned RIL’s offer. “I would have made a huge loss if I had agreed to sell out at the price offered by Reliance,” says the angry petrol pump owner, whose hands are pretty much tied because he has signed a 20-year lease agreement with the firm and cannot retail the products of other oil refiners.
Last month, RIL had said in a statement that the price of petrol sold through its retail outlets was Rs4.50-14 more than those of the public sector companies, whereas diesel cost Rs5-19.50 more. As crude prices soared, the gap widened and sales at RIL’s outlets declined sharply.
Ankur Relia contributed to this story.
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First Published: Fri, May 09 2008. 12 17 AM IST