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Diesel deregulation likely by Diwali, private pumps may return

business Updated: Oct 06, 2014 00:33 IST
Anupama Airy

Diesel prices are likely to be deregulated by Diwali, a move that is likely to benefit private companies including Reliance Industries (RIL), Essar group and others who have invested big money in fuel retailing and setting up of petrol pumps. A host of companies are gearing up to foray and re-enter the fuel retailing business, albeit with a wait-and-watch approach

If it happens, the cut in diesel prices will come after five years. Following decontrol, consumers may also see a Rs 2-2.50 per litre reduction in diesel prices.

State-owned oil companies, traders and petrol pump dealers expect the government to free up diesel prices and align them with market rates closer to Diwali or by the middle of the month after state elections get over. And if global oil prices continue to stay at current levels of below $95 a barrel and the value of the rupee stabilises against the US dollar, consumers may be gifted with a price reduction of close to Rs 2 to 2.50 a litre along with the policy decision to decontrol prices.

“The ministry has asked us to gear up for diesel price de-regulation... we are waiting for a policy decision that could come close to Diwali or by the middle of this month after state elections get over,” the chairman of a state-owned oil company said.

However, industry sources said companies will “wait and watch” and are in no hurry to go on aggressive expansion drives when it comes to fuel retailing, which witnessed a flurry of activity from leading players when petrol and diesel was first de-regulated in 2002.

“Global energy major BP has a tie-up with RIL for marketing but it seems that the UK energy major is in no hurry to set up petrol pumps in the country,” a petroleum ministry official said. “It is quiet unlikely that the trend witnessed after 2002 when deregulation of petrol and diesel saw private and public sector companies que up for fuel retailing, will be repeated.”

“There is certainly more caution amongst industry players this time around,” another senior petroleum ministry official said, adding that the government has received no new applications from companies. “Last application received was from BP who, too, is keen to market jet fuel or aviation turbine fuel in India but whether they will get into fuel retailing is still not clear,” he said.

At present, fuel retailing is dominated by state-run oil companies including Indian Oil, Bharat Petroleum and Hindustan Petroleum Corp Ltd.

RIL and Essar, and global major Shell may also look at expanding their petrol pump networks. Most closed their petrol pumps in 2008 as losses mounted after the government extended subsidy to state-run oil companies on sale of petrol and diesel.

In fact Mukesh Ambani-led RIL is said to be looking to lease its petrol pumps to state-owned oil marketing companies after diesel de-control. RIL had closed most of its 1,500 petrol pumps across India by 2008.

When contacted, an RIL official said that while the company was hopeful of diesel price de-regulation, it was watching how things unfold. “It could be a mix of leasing and re-starting the closed pumps,” a source close to RIL said.

Ruias-controlled Essar Oil, however, is keen to expand its existing network of 1,400 petrol pumps to 3,000 in the next three years after diesel prices are freed.