Reliance Industries has shut all of its 1,432 petrol pumps in the country after sales dropped to almost nil as it could not match the subsidised price offered by public sector competition.
The company owned less than three per cent of the 36,936 petrol pumps in the country. Of the total retail outlets, state run Indian Oil, Bharat Petroleum and Hindustan Petroleum own 34,304 pumps, while the remaining belong to private sector Essar Oil and Shell India.
"Reliance has informed that sales at their retail outlets was negligible due to selling price differential between private and public sector ROs, leading to the closure of all their 1,432 pumps in the country with effect from March 15," Petroleum Minister Murli Deora informed the Rajya Sabha on Tuesday.
Public sector currently sells petrol at a loss of Rs 13.97 a litre and diesel at a discount of Rs 20.97 per litre. This revenue loss is made up by the Government through issue of oil bonds and subsidy share from upstream firms like ONGC and GAIL.
Private firms such as Reliance were not entitled for the subsidy and priced fuel from their pumps at Rs 8-10 a litre higher than public sector competition, leading to fall in market share. "The price of sensitive petroleum products are fixed by the public sector oil marketing companies in consultation with the Government," Deora said.
"Private oil companies are not subject to pricing restrictions by the Government and are free to take their pricing decisions on commercial considerations." However, Essar Oil and Shell India have not closed their petrol pumps, he said.
Reliance had highest number of petrol pumps in Gujarat with 246 outlets, followed by Maharashtra (160), Uttar Pradesh (132), Andhra Pradesh (129) and Rajasthan (107). Deora said IOC, BPCL and HPCL plan to set up 1,830 more petrol pumps in the country during 2008-09 fiscal.
The gross under-recoveries of the state-run retailers on sale of petrol, diesel, domestic LPG and kerosene in 2007-08 are estimated at Rs 77,303 crore (Rs 773.03 billion), he said.
The Government issued oil bonds to IOC, BPCL and HPCL worth Rs 20,333 crore (Rs 203.33 billion) and upstream oil companies contributed Rs 15,873 crore (Rs 158.73 billion) to partially compensate the under-realisation for April-December period.
"For the same period, the impact absorbed by the oil companies after the issue of bonds and subsidised by the upstream oil companies, is likely to be Rs 11,413 crore (Rs 114.13 billion)," he added.
