IndianOil, Bharat Petroleum and Hindustan Petroleum on petrol pump expansion spree
New Delhi   12-May-2012

State-run oil marketing firms IndianOil, Bharat Petroleum and Hindustan Petroleum are on an expansion spree-setting up 3,100 petrol pumps outlets in 2011-12-brushing aside financial concerns arising out of their combined revenue loss of Rs 15,000 crore in the first nine months of this fiscal.

'State-run fuel retailers have added over 3,100 retail outlets in 2011-12, which works out to about 8.7 outlets per day,' says a latest report by Petroleum Planning & Analysis Cell, a data keeping arm of oil ministry. Each pump costs between Rs 50 lakh and Rs 3 crore, depending on the location and size of the unit, the report adds. The total pump outlets in India have grown to 45,000 by the end of this March.

'All additional outlets have come from PSU stable and private outlet number has actually declined marginally,' the report adds.

Rapid expansion by state firms comes at a time when the private sector is downsizing its retail network. Essar, Shell and Reliance Industries have closed some of their pumps due to subsidised sales by state-oil firms.

IndianOil, India's biggest fuel retailer by volume, has defended its move to expand network. "We are state-run companies. Unlike private firms, we can't shut down our outlets. We have responsibilities to cater to the country's growing fuel need. Over 64% of our retail expansion is KSK (kisan seva Kendra)," said IndianOil chairman RS Butola. IndianOil opened 900 petrol pumps in 2010-11, and 575 of them were in KSKs, says Butola. "We would maintain the same ratio. Other pumps are mostly located in semi-urban and small towns."

However, officials at state oil companies say the policy of expanding retail outlets in an environment where the government directly controls diesel prices and indirectly prohibits companies makes no sense. "The more we will sell petrol and diesel, the more (revenue) losses we would incur," said a senior executive of a Mumbai-based oil company, requesting anonymity. IndianOil, BPCL and HPCL have slipped into red in the first nine months ended Dec 31, 2011, and are seeking government compensation as well as discounts from upstream companies to bail them out.

The report also says sale of jet fuel, or aviation turbine fuel, in March fell for the first time in 30 months. It cited slow down in aviation sector as one of the major reasons for the decline. "The government has recently allowed airlines to directly import jet fuel, but it is too early to assess its impact," a PPAC official said.

Diesel has recorded a robust 10.3% growth in March due to higher sale of diesel vehicles, as the fuel is significantly cheaper than petrol. "This trend is unlikely to stop till diesel price is aligned to other competing fuels," the report said. The report says March also saw an 11.5% jump in petrol consumption, mainly because dealers built up inventory expecting a petrol price hike after assembly elections in Punjab, Uttar Pradesh, Uttrakhand and Goa.