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Rediff.com  » Business » Essar Oil cuts supply by 25%

Essar Oil cuts supply by 25%

September 19, 2005 10:07 IST

Weighed down by the surge in international crude oil prices, Essar Oil has curtailed supply to its dealers across the country and has deferred the commissioning of its 12-million-tonne Jamnagar refinery to September or October next year. The refinery was scheduled to be commissioned during the first or second quarter of 2006.

At present, Essar has a total of 514 oil pumps. Of these, 225 are in Gujarat and Maharashtra and the rest in the northern states. It is setting up 300 pumps at various places and  plans to have a chain of 2500 pumps across the country.

When contacted, an Essar spokesperson told Business Standard that the company had cut supply to its dealers by around 25 per cent. The company will also offer dealers compensation for the cut.

"We will continue to take care of the dealers' losses by paying them their margins on sales and fixed costs like rentals. The payment to dealers costs us less than the losses we incur on the supply of fuel to the dealers," the spokesperson said.

When contacted, an Essar dealer on the Baroda-Ahmedabad highway near Kheda said supply had indeed been reduced drastically for the past 15-20 days.

"Our supplies exhausted just yesterday and we are not sure of the arrival of fresh supply. We have been told that the supply will become regular from April next year when the company's own refinery goes onstream," the dealer said.

The Essar spokesperson said, "The mechanical completion of the refinery will be completed by June 2006 and it will be commissioned somewhere around September or October 2006."

Essar purchases its petrol and diesel from the Numaligadh refinery, the Kochi Refinery and the Mangalore refinery. It also imports a few parcels of diesel once in a while, mainly from Enoc in the UAE and other suppliers in West Asia.

Essar supplies 2,40,000 kilolitre of petrol and around 1,80,000 kilolitre per month to its dealers across the country. With the jump in crude oil prices, Essar's losses mounted to Rs 7 per litre for petrol and Rs 5 for diesel. The losses were somewhat set off after the petroleum ministry recently hiked the end-product prices.

However, it was back to square one when refineries increased the refinery gate prices of petrol and diesel by the same amount -- Rs 3000 per kilolitre or Rs 3 per litre for buyers like Essar. So, despite the hike in petrol and diesel prices, Essar has continued to lose Rs 7 per litre on petrol and Rs 5 per litre on diesel.

Kamlesh Trivedi in Ahmedabad
Source: