India asks oil companies not to open new retail outlets

Indicating a “crunch” in supply of petrol and diesel, the Petroleum and Natural Gas Ministry has asked the oil marketing companies (OMCs) to put on hold their plans to open new retail outlets.
Citing losses on account of under-recoveries on sale of petrol and diesel, the Ministry has asked the OMCs, who own around 37,000 petrol stations around the country, to immediately stop expansion plans till further directions. They include Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and the Mangalore Refineries and Petrochemicals Limited.

A similar direction has been issued with regard to Liquefied Petroleum Gas (LPG), putting restrictions on issuing new connections and opening new retail outlets. Official sources said although no official ban was imposed, an advisory was being sent to the OMCs to end indiscriminate opening of new outlets as the market had reached a saturation point.
Private oil company Reliance Petroleum recently closed down around 900 outlets after incurring heavy losses. Despite the price hike in June, the oil companies are losing Rs. 14.92 on a litre of petrol, Rs. 24.90 on diesel, Rs. 38.09 on kerosene and Rs. 338.53 on a cylinder of LPG.

The sources said the Ministry issued an advisory to Mangalore Refineries and Petrochemicals Limited (MRPL) to put the process of setting up new outlets on hold for two years due to under recoveries in retail marketing of petrol and diesel. The company has informed its shareholders in its annual report that it had reduced direct sale of diesel to the railways, State road corporations and other large consumers from April 2008 to restrict under recoveries.
The company had received approval to set up 500 retail outlets across the country.

MRPL, a subsidiary of Oil and Natural Gas Corporation has a turnover of over Rs. 37,000 crore. It had represented to the Petroleum Ministry for compensation for the under recoveries in direct sale of high speed diesel to the railways and other large consumers.
The company wanted to be treated on a par with the public sector OMCs. However, the government did not accede to the request.