Pvt fuel retailers see sales dwindle

For once, state-run fuel retailers and private ones want something in common — a fuel price rise.

A nearly 13 per cent increase in crude oil prices in the past three months has negatively impacted private fuel retailers’ sales. With the non-revision of fuel prices, they say, sales have fallen 70 per cent. Crude oil has climbed to $124 per barrel, against $110 in January.

Essar Oil, say sources, is having hardly any sales at its 1,406 operational outlets (another 254 are being built). The company declined to disclose figures. “Essar sells fuel at market-driven prices, which are very high. The company is selling but only in small quantities, in monopoly areas,” said a source in the know.

 

Reliance Industries’ fuel retail outlets are doing ‘bare minimum’ business. The company, said sources tracking its fuel retail business, is supporting these outlets financially to keep them afloat. RIL did not reply to an email query sent last week. It has 1,450 outlets which it operates under three formats — dealer owned, dealer operated (Dodo); company owned, dealer operated (Codo) and company owned, company operated (Coco).

“The majority of RIL's outlets are on the highways and no one comes to the highways to buy fuel. So, there is hardly any sales. Besides, crude has shot a new high. The under-recovery on diesel is Rs 12 a litre,” informed a source tracking RIL.

Essar Oil in an emailed statement said it did not incur any losses on the sales of petrol/diesel, since the prices at its retail outlets are linked to the prevailing international crude price. “For diesel, our prices are higher from that retailed by PSUs, with the differential ranging between Rs 8 and Rs 12 per litre. Petrol is Rs 2 to Rs 5 per litre higher than PSUs. With no subsidies available on under-recovery, and in the absence of fuel price deregulation, we have to sell fuel at a premium to PSU prices to recover our costs,” said S Thangapandian, CEO, marketing.

Essar operates on a franchise-based retail model; hence, the costs for opening an outlet are borne by the dealer. “It recently tied up with Indraprastha Gas; Gujarat State Petroleum Corporation; Mahanagar Gas Ltd, GAIL Gas; Sabarmati Gas; Adani Gas and Gujarat Gas Corporation to provide multi-fuel options as part of its efforts to support our franchisees in increasing footfalls at their outlets. Until date, 15 of its outlets in its countrywide retail network have CNG and two outlets have Auto LPG dispensing facilities. We plan to increase this number to 50 and 25, respectively, in the next fiscal,” added Thangapandian.

To enhance footfalls at its outlets, it has increased non-fuel retailing activities to provide an additional source of revenue for its franchisees. It has forged alliances with non-fuel retailers in segments, like lubricants, food & beverages, agro products, telecom and banking & finance.

Shell India, a fully owned subsidiary of the Royal Dutch Shell Group, has set up a total of 82 retail outlets, of which 21 have been temporarily closed, it states on its website. Continuous attempts to reach its India spokesperson failed.

Shell is the only international energy company licensed to build and operate service stations in India. It acquired a marketing license from the Government of India in 2004 to set up a network of up to 2,000 fuel retail stations.

Government-owned companies dominate the fuel retail business, with over 90 per cent share. IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have demanded that since they have not been allowed to raise the petrol price, they be compensated for Rs 4,500 crore in losses on its sale. Currently, the government compensates oil companies for losses only on diesel, domestic LPG and kerosene.