Even losses of over Rs 300 crore (Rs 3 billion) per day from selling automobile fuels  have not stopped government-owned oil marketing companies from expanding their retail network across the country.

The three government-owned companies -- Indian Oil Corporation [Get Quote] (IOC), Bharat Petroleum Corporation [Get Quote] (BPCL) and Hindustan Petroleum Corporation [Get Quote] (HPCL) --  are together planning to open over 3,000 retail outlets this financial year as against 2,000 outlets opened last year. In fact, over 1,600 outlets have already been commissioned in the current year.

Not only is the number of outlets to be added higher this year, the marketing losses (under-recoveries) are also projected to be higher, at around Rs 69,000 crore (Rs 690 billion) as against Rs 49,000 crore (Rs 490 billion) last year.

"If we do not open the outlets, someone else will," said a spokesperson of IOC, which currently has over 16,500 outlets across the country. "It is a process of building and maintaining our brand," the official added.

The marketing businesses of oil retailers are suffering losses as they are forced to sell petrol, diesel, LPG and kerosene at subsidised prices. Demand for these products is growing at a healthy rate of about 8 per cent per year.

"The sales per outlet have come down to a large extent. But we have to open outlets as we have to stop the competition from coming in," said an official with BPCL, which has commissioned 215 outlets this year and plans to open another 200 in the next quarter. It currently has around 8,015 outlets.

The average throughput of petrol per outlet per month has more than halved to around 70 kilolitres now from 160 kilolitres in 2003. In June, Petroleum Minister Murli Deora said  BPCL would open around 800 outlets this year, and HPCL another 800.

Both companies have, however, scaled down their targets. Analysts say oil retailers are also looking at revenues from non-fuel retailing, such as FMCG products and grocery sales at their outlets.

"Since we must open outlets and revenues from non-fuel retailing are good, we are hoping to cash in on that," an IOC official said. The company currently earns about Rs 200 crore (Rs 2 billion) from its non-fuel retail, and hopes to take that up to Rs 3,000 crore (Rs 30 billion) per annum in the next few years.

Another public sector company, Mangalore Refinery and Petrochemicals [Get Quote], plans to open around 15 outlets over the next two months "in order to build our brand for the better times we expect in the future", MRPL Managing Director R Rajamani said.

Another refiner, Numaligarh Refinery, a subsidiary of BPCL, has 74 retail outlets across the country and plans to open at least 100 more this year, both in the North-East and north India, said a senior official in the oil ministry.

However, private sector companies, Reliance Industries [Get Quote] and Essar Oil [Get Quote], are not keen on expanding their fuel retailing market as they are not compensated for subsidised fuel sales. RIL has around 1,800 retail outlets, while Essar has 1,250. The two companies are "not keen on opening new ones as the business is not profitable", an official said.

Vikram Mehta, chairman, Shell India, which currently has around 35 outlets and is planning to open a few more in south India, says that the industry is expanding as there is hope that the pricing of fuels will be freed by the government in the near future. 

"If they do not want to kill their companies, they will have to free fuel pricing," Mehta said during an interview.

RETAIL PUSH

• The marketing businesses of oil retailers are suffering losses as they are forced to sell petrol, diesel, LPG and kerosene at subsidised prices.
• Not only is the number of outlets to be added higher this year, the marketing losses (under-recoveries) are also projected to be higher, at around Rs 69,000 crore as against Rs 49,000 crore last year.
• The marketing businesses of oil retailers are suffering losses as they are forced to sell petrol, diesel, LPG and kerosene at subsidised prices.
• Analysts say oil retailers are also looking at revenues from non-fuel retailing, such as FMCG products and grocery sales, at their outlets as the revenue from these is good.
• However, private sector companies, Reliance Industries and Essar Oil, are not keen on expanding their fuel retailing market, as they are not compensated for subsidised fuel sales.