MRPL's retail outlet plans on hold

To stay put till diesel is fully deregulated

In June 2010, when the Union government deregulated petrol prices, Mangalore Refinery and Petrochemicals Limited’s management breathed a sigh of relief.

MRPL, that has been planning to go whole hog in the retail segment, immediately drew a plan to set up 122 retail outlets within two years. Two years down the line, the plans have been shelved. "After the deregulation of petrol, we revised our retail plans but with diesel pricing still regulated, it may take MRPL a couple of more years to get into the fuel retailing segment aggressively," said a senior MRPL executive.

MRPL, a subsidiary of state-run Oil and Natural Gas Corporation (ONGC), in its annual report released last month says, "keeping in view the under recoveries in retail marketing of auto fuels the company continues to adopt a non-aggressive approach with its minuscule presence in the retail marketing."

 

MRPL has three retail outlets operating under the HiQ brand in Mangalore, Karnataka. It entered the fuel retail segment in 2008. Setting up an outlet costs MRPL over Rs 3 crore. For expansion, the company planned to follow the dealer-owned and operated pattern.

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 compensatory bonds (for retailing petrol fuels below market price) to MRPL, though it was a government company. "Though we are selling petrol at our retail outlets, a petrol pump cannot be operating on petrol alone," the executive added. Besides looking at alternative fuel options at our retail outlets, the company is awaiting more clarity on diesel and wants to wait for few more years. Petrol margins also keep varying. A month back Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum, the three oil marketing companies, were making Rs 6 a litre revenue loss on petrol, because the government did not allow them to increase retail prices, decontrol of petrol also became a farce. With the recent changes in tax structure that passed on Rs 5.30 benefit to OMCs without a price increase, MRPL has started making significant margins on petrol. MRPL says it wants to be a significant player in fuel retailing but being a standalone refinery that is not part of any oil marketing company (OMC), it does not get compensated for losses by the government.

Besides, if it prices its products at market rate, cheaper fuel from OMCs makes its retail outlets uncompetitive.

The company had, few years ago, acquired some land to expand its retail network but returned the same to the respective state governments due to ambiguous policies on fuel retailing.

Other than MRPL, Reliance Industries, Shell India, Essar Oil and Numaligarh Refinery are the private players in the oil marketing segment. There are the three public sector companies -- Indian Oil Corp, Bharat Petroleum Corporation, Hindustan Petroleum Corporation -- which dominate over 90 per cent of India's fuel marketing segment.

MRPL, which operates a 15 million tonne refinery at Mangalore in Karnataka, plans to expand its crude refining capacity by another 6 million tonnes, to 21 million tonnes a year by 2021.

In the current five year plan, the refining capacity of MRPL would be increased from the existing 15 MTPA (million tonnes per annum), to 18 MTPA.