The oil and gas sector in India has seen considerable reforms in the last six years. Policies like HELP, OALP and DSF have attracted more investment in the sector through improvements in fiscal terms i.e. doing away with production sharing contracts and allowing marketing and pricing freedom; resolving issues in existing fields and aiding development of resources which have already been discovered. The new guidelines for marketing fuel tackle the consumer end of the sector and help in enhancing the supply infrastructure.

The earlier rationale that granting authorization for retail operations was to be an incentive for investing in refineries or in exploration and production (E&P) in the sector does not hold value anymore. As the expert committee set up to deliberate the new guidelines stated, India has seen a rapid increase in refinery capacity expansion in the last 21 years. Refinery capacity is expected to increase to ~414 MT by 2030. This essentially disincentivizes new players from investing in a market where the outlook beyond 2030 is riddled with expectations of technical breakthroughs in battery storage and alternative fuels to petrol and diesel. Investment in E&P has seen an uptick given the recent auctions under the HELP reform, without these companies participating in the retail market. Therefore, the 2002 guidelines had anyway been made redundant by market forces and technology.

Major oil and gas players like Reliance Industries Ltd, BP Plc, Nayara Energy Ltd, Royal Dutch Shell Plc, Total SA and Adani Group have committed to expand their retail operations to ~7,000 outlets by 2030. This means that in the next 11 years, this arm of the sector will see investments of approximately 1,500 crore, and this is without expansion plans by OMCs. The new guidelines will go a long way in making these numbers a reality.

Allowing non-oil companies to invest in retail operations also means oil and gas majors can potentially tie up with technology majors to develop technologies that will lead to improved efficiencies in retail marketing. This also opens the way for eventually transitioning fuel retail from being serviced by vertically integrated oil and gas companies to pure retailing companies like hypermarkets. This means the sector will also see increased job opportunities.

Another new guideline that will have a far-reaching impact is one on installing facilities for marketing of at least one new alternative fuel like CNG, LNG, biofuels, electric charging at the proposed retail outlet within three years of operationalization. This regulation aids the government’s plans to transition to cleaner energy. Firstly, it benefits CGD companies (who have won the auction rounds) to set up petrol and diesel retail outlets along with the CNG in tier-II and tier-III cities. This will aid utilization of these outlets while the companies aim to build a consumer base and facilitate demand for CNG. Secondly, it aims to resolve the age-old conundrum that has faced oil and gas companies in India—what comes first, demand or infrastructure? It put in place a supply network on the back of existing demand to drum up demand for cleaner technologies. It helps in integrated planning with other policies on LNG, biofuels and electric mobility.

Still, operational challenges such as acquiring land and approvals will exist. Further, with OMCs commanding the majority share in the supply network, the volatility in fuel prices has been efficiently managed by the government. With increased share of private players, the government may not be able to manage it very well, affecting end consumers —something that may be politically untenable. However, these are operational challenges that will have to be tackled as participation increases, which this policy will aid to a large extent.

Swati Mitchelle D’souza researches on energy and climate policy issues. She is a consultant with a think tank in New Delhi.

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