The petroleum ministry’s efforts to further expand the country’s retail fuel network may eat into its own existing market, instead of catering to a new one, a report by rating agency CRISIL has suggested. The planned expansion would be feasible if stopped at less than half its target, it said.
In November 2018, the government allowed the three oil marketing companies (OMCs) — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) — to add 78,493 pumps combined to their existing retail network.
“The economics do not support the addition of 78,000 petrol pumps. There is room for only less than half, that is 30,000 petrol pumps, if the pumps are to maintain current throughput levels,” CRISIL said in its note.
At present, India has 64,624 fuel retail outlets. CRISIL pegged the current throughput of these outlets at 160 kilo litres a month (KLPM), which is less than half of what it is for a developed country like the US.
“If all the proposed pumps are commissioned, the throughput of dealers will be significantly affected and operating the pumps, for all intent and purposes, will become unviable,” the CRISIL report added.
In terms of throughput, state-run oil companies are already under pressure compared to private companies such as Reliance Industries and Shell. CRISIL’s report suggests RIL’s fuel retail throughput stands at 300 KLPM, while that of Nayara Energy is lower than that of state-run entities.