MRPL awaits market pricing freedom for auto fuels

Till this happens, plan to scale up retail presence on hold.

Standalone refiner Mangalore Refinery and Petrochemicals (MRPL), a subsidiary of state-controlled Oil and Natural Gas Corporation, plans to expand its presence in the petroleum retail business as soon as the government allows the linking petrol and diesel sales to market prices.

MRPL has two retail outlets operating under the HiQ brand. It has an approval in place since 2006 from the Union government to set up 500 retail outlets. The government had asked it to put its plans on hold and was firm that it would not give any comensatory bonds (for retailing petrol fuels below cost price) to MRPL, though it was a government company.

MRPL says in view of the heavy underrecoveries (losses), it has been treading cautiously on setting up retail outlets. Each new outlet would cost the company over Rs 2 crore. The company would follow the dealer-owned and operated pattern.

"On the advice of the ministry, we had put our retail plans on hold. But, with the government planning to free retail fuel prices from its control, we might review our retail plans,” a senior executive from MRPL told Business Standard.

Presently, the state oil marketing companies lose over Rs 5 on every litre of petrol retailed, over Rs 3 per litre on diesel, Rs 16 on a litre of kerosene and over Rs 260 per LPG cylinder.

The Kirit Parikh committee on the subject, in its report of last month, had recommended market-determined pricing for petrol and diesel and linking the price of domestic LPG and kerosene distributed through the Public Distribution System (ration shops) to the increase in per capita gross domestic product and agriculture GDP, respectively.

It had also suggested a partial increase of Rs 6 a litre on kerosene and Rs 100 on every LPG cylinder. It also proposed a 20 per cent reduction in kerosene allocations for the PDS.

“Anybody in the business would like to reach to the end-user. Our dreams and plans to be in marketing remain. But, we are a standalone refinery and cannot afford to lose. We had acquired some land (for the planned venture) but returned these to the respective state governments, as government's policy was not clear,” added the executive.

With MRPL’s entry into the oil marketing segment, the number of companies would rise to nine. There are the three public sector companies -- Indian Oil Corp, Bharat Petroleum Corporation, Hindustan Petroleum Corporation -- and another five with fuel marketing rights. These being Reliance Industries, Shell India, Essar Oil, ONGC and Numaligarh Refinery.

MRPL, which operates a 9.69-million tonne refinery at Mangalore in Karnataka, is expanding its crude refining capacity to 15 million tonnes a year. Post expansion, the company says it plans more emphasis on developing export potential to sell its surplus production capacity. “We export products to Mauritius at present. We are in talks with other countries for export,” the official added.