Essar retailers take on PSUs with cheaper fuel | business | Hindustan Times
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Essar retailers take on PSUs with cheaper fuel

business Updated: Jan 09, 2009 20:56 IST
Anupama Airy

Essar Oil Ltd (EOL), the second largest fuel retailer in the country, has been selling cheap petrol and diesel at its 1,000-odd petrol pumps across the country from January 1.

The move is significant because this is the first time that a private sector fuel retailer has broken ranks from PSU oil companies to reduce prices.

The price of petrol being sold at the Essar Oil pumps is cheaper by one rupee a litre and diesel by 25 paise a litre as compared to the public sector counterparts — IOC, HPCL and BPCL. Essar Oil is currently retailing around 80,000 kilolitres of petrol and diesel per month.

The price reduction comes ahead of a much-debated government move to lower pump prices of petrol and diesel sold by public sector oil companies. Pump prices of petrol and diesel were last revised downwards in December, 2008 by Rs 5 a litre and Rs 3 a litre respectively.

Private companies are free to set the prices of petrol and diesel. However, the government continues to dictate prices to public sector oil companies, who scrupulously followed such orders even after the dismantling of the APM (administered pricing mechanism), way back in 2002.

“We are not doing this as part of any strategy as we are a small player in the market with less than 4% share. It is some of our dealers in Rajasthan, Gujarat and Uttar Pradesh who may be selling cheap fuel out of the benefits given to them,” said a company official who did not want to be named.

Reliance, which is India’s biggest private refining and marketing company, closed its 1,400-odd petrol pumps when the crude prices rose last year. Since then, the sharp fall in crude oil prices has made retail sales viable again, and Reliance has informed the government it is keen to resume its fuel retail operations. It has also sought special tax dispensation to sell products in the domestic market.

At present, the market share of private retailers is much less than their public sector peers. Apart from EOL’s 4 per cent, IOC-BPCL-HPCL sells about 95 per cent of fuel sold. Shell India controls the remaining one per cent.