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New Delhi: India's Reliance Industries will close about 900 petrol stations as subsidised sales by dominant state firms makes private outlets unviable, but Shell and Essar Oil plan to continue operations.
A Reliance Industries official, who did not want to be named, said the company was shutting down 900 pumps it directly owns as it did not get any subsidy.
"We have stopped supplying products to the company-owned outlets. In a week's time or perhaps less than that the outlets will stop selling fuel," the official said, adding that another 500 petrol stations run by dealers may continue operations.
Reliance Industries, which runs India's biggest refinery, set up a series of fuel outlets after the government ended a state monopoly over petrol stations less than a decade ago.
Reliance grabbed over 15 per cent of the market two years ago, but sales fell after the government, striving to contain inflation, did not allow state firms to raise retail prices in line with soaring crude oil prices.
Private firms sell fuel at market prices but state firms such as Indian Oil Corp, Bharat Petroleum Crop and Hindustan Petro-leum can retail fuels at lower prices as the government compensates them with bonds and cheaper crude oil.
"The move is due to lack of level playing field," the Reliance official said.
A spokesman for Reliance Industries declined comment.
State firms control about 33,000 petrol stations, while private rivals run about 2,500 and have a marginal role in the market.
Another private oil firm Essar Oil, which has a network of 1,000 pumps, has no plans to shut down operations, a company spokesperson said.
"All our retail outlets are operated by dealers ... But sales are marginal at our stations because of prices differential, which is Rs7-Rs8 a litre (about 15 per cent) higher than what is being sold by state-run refiners," he said.
He said Reliance, Essar and Shell, the only multinational oil firm with a presence in Indian fuel retailing, had written to the petroleum regulator seeking parity with state-run firms.
A spokesman for Shell India said: "We want a level playing field ... There should be no compensation, let the market decide. And if there is a compensation, it has to be consistent to all players".
He said that sales at Shell's directly operated 50 retail outlets has significantly declined as it sells better quality fuel at higher rates.
The Hindu Business Line newspaper quoted Shell India's Managing Director Surinerdeep Singh as saying private firms were being treated unfairly.
"We feel that it is not right to give valid licence and then say you cannot have subsidies and bonds. What is happening in India is against competition policies," he told the daily.
Reliance operates a 660,000 barrels per day refinery while Essar owns a 210,000 bpd plant, both in the western Indian state of Gujarat.
Third unit: Firm plans Refinery
India's Reliance Industries Ltd (RIL) plans to build a third oil refinery, aiming to expand its processing capacity to 100 million tonnes, the Business Standard newspaper reported, without saying where it got the information.
RIL has hired an international consultant to evaluate the feasibility of a third refinery, the report said.
RIL, which runs a 33 million tonnes-a-year refinery in Jamnagar in the western Indian state of Gujarat, is setting up a 29 million tonne refinery in the same location, the report said.
- Bloomberg
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