Govt Stand On Retail Outlets Will Hit Ibp Selloff, Feel Bidders

The government's stand that it will control the number of new retail outlets for petroleum products even after the deregulation of the petroleum sector, is seen by bidders in the race for IBP as a major dampener to the company's disinvestment.

The private sector bidders and multinationals have also objected to the government's efforts to make it mandatory for the private players to ensure supplies to far-flung and uneconomic areas bearing an additional cost, by setting up a portion of their retail outlets in remote and hilly areas.

"The government, through its recent statements, has said private eligible companies will be given freedom to enter the market but the government will decide as to when and where they will put up retail outlets and also the number they will be permitted. This is telling the private sector companies that they may enter the retail market at their peril," the head of a private sector oil company bidding for IBP, said.

"The strategic investor should ideally be given the freedom to choose the number and location of the outlets. Our business plan, and not government policy, should decide whether our outlets are a profitable proposition or not," the official said.

The private and public sector oil companies now seem to be on a collision course as oil PSUs feel that the government should apply the same yardstick as is applicable to them for awarding new outlets to the private players. The PSUs, they argued, currently open a significant number of outlets in far and remote areas due to socio-political reasons, in spite of economic non-viability.

Although the government has so far not announced its policy on allotment of new outlets in the post-deregulation period, sources said, it is likely to prepare a "biennial marketing plan", wherein players from both the public and private sector would draw rules governing preparation of marketing plan under the guidance of the government.

A high-level committee headed by Naresh Narad, additional secretary in the ministry of petroleum and natural gas, has suggested to the government that, post-deregulation, the allocation of retail outlets to oil companies be in proportion to their refining capacity.

Sector analysts feel that, if accepted, this proposal will severely handicap the retail network of multinational oil companies, who do not have any refineries in the country.