RIL faces dealer block for reopening petrol pumps

Over 150 fuel retailers of Reliance Industries Ltd will meet in Gujarat next week to decide on boycotting the company's offer of re-starting their outlets.

The dealers, part of the RIL's Gujarat State Petrol Pump Dealers Association, said they were not happy with the private company’s latest retailing policy and had decided not to re-open their pumps.

“RIL had told us our commission would be higher than that of dealers of other oil marketing companies.

"But after four years of waiting, the commission increase offered is not agreeable.

"We will take a call on re-opening pumps in our meeting,” said one of the retailers.

RIL has offered an additional commission of 0.12 paise on sale of every litre of diesel and 0.40 paise on sale of every litre of petrol.

This would take the commission on diesel to a total 0.92 paise per litre and Rs 1.75 per litre on petrol. Commissions earned by retailers of state-owned oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation stand at Rs 1.98 per litre for petrol and Rs 1.16 per litre for diesel.

"RIL has neither increased the commission nor provided us with a guarantee on smooth functioning of the business despite the fluctuation in oil prices.

"Diesel prices have gone up, so my cost of procuring the product at the outlet goes up.

"But there has not been a corresponding increase in the commission offered.

"Starting a fuel outlet in this case would imply multiplying our losses," said an Ahmedabad-based fuel retailer for RIL.

The dealers said if they started selling diesel from their pumps, it would mean procuring the product for Rs 20-25 lakh and employing additional manpower.

RIL did not reply to an email questionnaire.

A senior RIL executive confirmed the company was in discussions with its fuel retailers to re-open

pumps but he declined to discuss specifics.

According to the dealers, RIL had conveyed to them that if diesel was deregulated, RIL might not tie up with any of the state-run oil companies.

RIL is considering a tie-up with Hindustan Petroleum Corporation.

Diesel has become profitable for Indian refiners as Brent crude is down over 21.5 per cent since its high of $116 in June 2014.

It closed at a 27-month low of $91.03 per barrel on Tuesday.

After over a decade, diesel sales have turned profitable.

For the fortnight of September 16-1 October, oil marketing companies were realising Rs 1.90 per litre on sale of diesel.

Since January 2013, diesel prices have been raised every month by up to 50 paise per litre. Petrol prices were deregulated in June 2010.

RIL had in July begun speaking to dealers' on restarting 1,400-odd fuel pumps in the country.

While a few company-owned pumps have begun dispensing fuel, around 150 dealer-owned, dealer-operated or company-owned, dealer-operated  outlets will be re-opened at a later stage.

At company-owned, dealer-operated outlets, RIL takes care of the cost on account of services.

In May 2008, RIL had closed its fuel pumps due to mounting losses, as it was selling fuel at rates much higher than the subsidised prices of state-owned oil companies.

RIL's fuel retail market share is less than 0.5 per cent.

In 2010, around 75 fuel retailers in Gujarat had decided to terminate RIL dealerships and sought reimbursement for investments made.

The dealers said they invested between Rs 2 crore (Rs 20 million) and Rs 4 crore (Rs 40 million) in each outlet.

Depending on the location, the cost of land was between Rs 1.5 crore (Rs 15 million) and Rs 3 crore (Rs 30 million), with another Rs 30 lakh (Rs 3 million) to Rs 1 crore (Rs 10 million) thrown in for maintaining services at the outlets.