Fuel price-war looms, and you may be winner
Subsidy shadow: With the government freeing up diesel, private players may return to fuel sales, driving down retail prices.business Updated: May 11, 2013 02:19 IST
Soon, you may want to cruise your neighbourhood to keep an eye on how petrol and diesel are priced at various petrol stations.
The government’s intent to deregulate petrol prices and go for a steady and staggered increase in diesel prices — to wipe out its huge subsidy outgo every year — is likely to bring back private companies such as Reliance Industries, Essar Oil, Shell and others into the business of retailing fuel.
The move, likely within six or seven months, would clearly benefit consumers as increased competition between the private and state-owned oil companies would drive down prices of petrol and diesel.
In most other countries, automobile fuel prices change on a daily basis, as fuel is sold at market prices and without any government interference. In India, private companies stayed away from fuel retailing due to government-imposed price controls, preventing open competition.
Private biggies such as Reliance, Essar and Shell are already retailing petrol, which stands de-controlled. However, diesel is still regulated, making the fuel retailing business unprofitable for them. Cairn India, Numaligarh Refinery, MRPL and ONGC are other companies eligible to set up petrol and diesel retail outlets in India.
“We are happy the way diesel prices are being adjusted on a monthly basis. If the trend sustains, private players will be back soon in the market,” said LK Gupta, MD, Essar Oil.
Past bitter experience has however left companies wary.
“While phased increase of diesel prices is a good sign, we want to wait and watch. Previously private companies pumped in huge resources to retail fuel, but the pricing controls on fuel retailing resulted in shutting down of private sector petrol pumps,” Gupta said.
While the RIL spokesperson refused comments, company sources said, “RIL is prepared to re-enter fuel retailing provided there is a surety that the government will continue with the reforms on fuel pricing.”
In 2002, the government had awarded fuel retailing rights to companies that then invested R2,000 crore in petroleum infrastructure. However, they beat a retreat due to the pricing policy, and the investment was junked.