RIL, BP say private fuel retailing sector unsustainable

The joint venture between Reliance Industries and BP, RBML has told the government that the private fuel retailing sector is unsustainable after public sector firms frequently froze petrol and diesel prices far below their costs, said a report by PTI.

Indian Oil Corporation, Hindustan Petroleum, and Bharat Petroleum froze fuel prices for 137 days, beginning in November 2021, and again went into a 47-day break. RBML has scaled down its operations to make up for the Rs 700 crore loss it incurs every month.

Over the last weekend, fuel prices were slashed by Rs 8 a litre for petrol and Rs 6 a litre for diesel, however, this was passed on to the consumers. Sources aware of the matter told PTI that RBML contends that PSU oil marketing companies control over 90 percent of the market and are the price-setters, leaving no room for private fuel retailers in the fixation on the retail selling price of petrol and diesel.

Reports claim that the PSUs did not increase fuel prices as per international crude oil prices which have led fuel retailers to incur losses since February 2022. As of May 16, net under-recoveries in the industry were Rs 13.08 per litre for petrol and Rs 24.09 per litre for diesel.

At present, Reliance operates and owns two refineries at Jamnagar in Gujarat. One of them is meant solely for exports. BP has no equity shareholding in them. The JV, RBML buys fuel at market price from Reliance and other oil companies to supply petrol pumps.

In addition to Reliance, seven new private retailers have taken marketing authorisation for retailing fuel after a relaxed fuel retailing policy was announced in 2019. However, they too are facing difficulties and financial hardship due to the unprecedented under-recoveries on sales of petrol and diesel.

Private retailers want PSU oil marketing companies to follow the free market-determined pricing policy, facilitating daily revision, while also wanting a reduction in central excise and VAT, and a shift from ad valorem taxation to specific taxation. If not done, private fuel retailers may be driven out of the business, similar to 2008.

from | The Financial Express https://ift.tt/xwN2EfC