The threat of being priced out of the market by state-owned oil marketing companies has forced the private sector players to also opt for price cuts of auto fuels.
Shell, which operates 17 retail outlets in Tamil Nadu and Karnataka, has already cut prices of automobile fuels to align them with public sector rates, which were cut last week.
"We cut retail prices of transportation fuels when the government reduced prices on February 15," Shell spokesperson Deepak Mukarji said.
State-owned oil marketing companies Indian -- Oil Corporation, Hindustan Petroleum and Bharat Petroleum -- are selling petrol and diesel in Bangalore at around Rs 50 and Rs 35 per litre. Shell, which operates 10 retail outlets in Karnataka is selling at similar rates.
Following Shell, private sector giant Reliance Industries is also planning to reduce prices. "A price cut is eminent," a senior Reliance official said. "The price cut could possibly be announced some time next week," the official added.
The official declined to divulge the quantum of the price cut, but analysts believe it will be by a significant amount as Reliance is already selling petrol, which is about Rs 4.50 higher than what the state owned companies charge per litre.
Reliance was selling petrol at Rs 2.50 a litre higher, which has now increased to Rs 4.50 after the government cut prices of petrol and diesel by Rs 2 and Re 1 a litre respectively on February 15.
Reliance had cut prices of both petrol and diesel on October 1 last year by Re 1 per litre. Another Re 1 was shaved off retail prices on October 16, which had reduced the price differential for petrol to 50 paisa. However, with two price cuts by the government in November 2006 and the one last week, the differential has increased to Rs 4.50 a litre.
"The private sector will have to align their retail selling prices with the state-owned companies if they are to compete. State-owned companies own almost 95 per cent of the total retail outlets in the country and the consumer can always shun the private player if rates are too high," said an analyst.
While private players typically offer better service, most consumers are not willing to pay more than a few paisa premium for that.
Reliance, which had earlier said its retail prices would continue to be in line with international crude oil prices, is being forced to cut rates of auto fuels as marketshares are falling.
