Business - India;RIL may reopen petrol pumps as crude falls

Piyush Pandey

MUMBAI: Reliance Industries (RIL), the country’s biggest private firm, is evaluating options to reopen most of its closed petrol pumps, thanks to mor
e than 50% drop in crude oil prices in the past one year.

RIL, which had closed down its retail fuel operations in March in the wake of spiralling crude oil prices, will restart the retail fuel business as soon as its rivals —state-owned oil marketing companies — drop prices of petrol and diesel, said sources close to the development.

The idea of reopening the retail business is getting momentum at RIL ever since the government hinted a price cut in October-end, they added.

In an e-mailed reply to ET, RIL’s spokesperson said: “RIL closed over 1,400 petroleum retail outlets across the country on March 15, 2008, owing to the differential between the company’s prices and the subsidised prices offered by the public sector oil firms.

We are not aware of any move to offer a level playing field for us to review our decision.” According to sources, crude oil prices have come down to $65 a barrel from a record of $147 a barrel in July. “A marginal reduction of prices by the state-owned oil marketing companies will make RIL’s retail business viable,” said an industry source. Another private sector oil company Essar has already reopened its 360 closed fuel outlets.

Essar is planning to double its retail network by the end of November, 1,000 by December and 1,250 by January 2009.
“If crude prices go below $65 a barrel will provide us (private players) a level playing filed as compared to state-owned companies and we will be able to break even at this rate,” said an official of a leading private sector oil company.

An analyst of an international brokerage said: “RIL’s Jamnagar refinery is an export-oriented unit (EOU) which will face double taxation if it sells fuel in India. It (RIL) has to either outsource fuel or import fuel to sell it at its own outlets.”

An RIL official admitted that there is concern on double taxation, but he declined to comment as to how the company is going to handle it.

RIL has asked the government to allow it to sell diesel to the state-owned oil marketing companies as deemed exports. If it is granted, RIL would not only be exempted from paying additional taxes but also its sales in domestic tariff area would be counted against its net foreign exchange earning liability.