Can't compete with OMCs: RIL dealers

While deregulation of fuel prices had led to a gradual re-opening of retail outlets by dealers of Reliance Industries (RIL), a closure of several of these could again be in the offing.

In the past six-odd months, almost 1,000 RIL dealerships had reopened retail outlets (ROs); there had been 1,400 filling stations at one time and all had to close. However, uncompetitive commissions by RIL on petrol and diesel sales has meant dealers making losses, of Rs 25,000-30,000 a month, they allege. They're asking for a rise in the commission to match those given by government-owned oil marketing companies (OMCs).

The government deregulated diesel prices last October, providing a level field for private and state-owned retailers. After which, private companies - RIL, Essar Oil and Shell India - moved to take advantage. State-owned refiners Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation control 95 per cent of the retailing market.

"If the commissions are not revised, we will have to close the pumps again, by early next year. As against business of Rs 1.25-1.3 lakh a month that could help us break-even, we are hardly making Rs 1 lakh," said Sunil Golwala, an RIL fuel retail dealer in Rajkot.

An e-mailed query to RIL remained unanswered. Earlier this year, the company had said it would reopen all the 1,400 filling stations in a year, to regain its 2006 market share of 14.3 per cent in diesel and 7.2 per cent in petrol. In Gujarat alone, a little over 100 ROs of the original 300 had gradually reopened since May, when the company revised the commission for dealerships. However, the commission is still less than that of the government OMCs. While the latter offers Rs 1.40 a unit on diesel and Rs 2.30 a unit on petrol, RIL's revised commission to its dealers is Rs 1.03 in diesel and Rs 1.75 in petrol, said Golwala.

"Apart from revising the commission and matching it with that of the public sector units, we are also asking the company to resume its loyalty programmes," said Golwala.

Ameet Patel, who runs an RIL outlet in Unjha, says: "Operating expenses have been on the rise. The margins could improve if the company would revise the commission. For now, to reduce risk in the business, we have stopped selling fuel on credit, which has also halved our monthly sales."

Private refiners had entered fuel retailing after the segment was opened in 2003. By 2006, most of them had started winding down operations as oil prices rose, and it became difficult for them to compete with government-dictated subsidised prices of petrol and diesel. RIl shut its filling stations in May 2008 as the losses mounted.

Today, subdued sales have meant Reliance's ROs' daily requirement of fuel has fallen to 2,500 litres in diesel and 800 litres in petrol, as against the pre-2008 levels of 4,000 litres a day in diesel and 1,000 litres in petrol, say authorised dealers.

According to Patel, with RIL likely to resume or launch some of its earlier value-added services, sales could pick up soon. The company is learnt to be planning to launch a 'Trans-Connect Network', a fleet management-cum-loyalty programme for large customers who can enjoy benefits of cashless transactions through prepaid balance of anywhere between Rs 5 lakh to Rs 20 lakh.

Essar Oil, Shell India, and Mangalore Refineries and Petrochemicals are also scaling up their fuel retailing operations. Essar Oil is readying another 1,400 filling stations, over and above the existing 1,500.