Saturday, June 13, 2009

Private oil companies may hike prices

Even as the government is yet to take a decision on revising upward product prices of state-run oil companies, private oil firms, such as Reliance Industries (RIL) and Essar Oil, are close to deciding on a price hike, as early as next week.

While Essar Oil has decided to hike prices from June 16, RIL has not yet taken a final decision, according to people familiar with the development.

Confirming the price revision, a senior Essar Oil official told ET: “At present, we are selling petrol and diesel at PSU rates in most of our retail outlets. Only in a few states, we are selling petrol that is Rs 1-2 higher than the PSU prices. With the sudden spurt in international crude oil prices, we are planning to increase petrol prices between Rs 1 and Rs 3 and diesel prices by about Re 1 and Rs 2 per litre. However, diesel prices may not be increased in Gujarat. The revised price will be effective from June 16.”

RIL, which had recently started selling diesel at its 65 operational outlets, is yet to take a final call on the price hike.

The company is awaiting for policy reforms from the government on prices of petroleum.

“RIL has started operations progressively at some of its retail outlets during the last one month. Currently, only diesel is being sold through these outlets at prices at par with PSUs. We continue to monitor developments on fuel price deregulation to decide on further course of action,” said an RIL spokesperson.

According to an analyst with international broking firm: “With crude trading over $72 per barrel, the margins have turned negative for private players. The more they sell, the more they lose. So, they increase prices to minimise losses. In the process, private players lose customers to PSU players.”

In 2007, RIL gained a 14% of the market share in diesel sales. They currently have negligible market share after closing down most of their outlets. Essar Oil, with 1,230 operational outlets, has garnered close to 3% market share in the retail business over the past six months. Essar Oil has earned monthly revenues of Rs 240 crore in the January-March period.

In an e-mail response to queries made by this paper, an Essar Oil spokesperson said: “Private players, including Essar, look forward to a level playing field which was promised before the investments were made in upstream and midstream sector. Huge investments made in the retail sector will be lying idle if the same is not implemented. This also has a major impact on the service.”

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