Private fuel retailers relieved as OMCs end 19-day price freeze

Private fuel retailers are relieved at the state-run oil-marketing companies ending their 19-day retail fuel price freeze on Monday.

In a market dominated by state-run oil companies, private retailers, industry sources say, are forced to follow price trends set by state-run companies.

“This has always been the trend during elections. State-run oil companies do not hike prices in this period and all private fuel retailers are forced to follow suit,” said an executive of a private fuel retail firm.

On Monday, state-run oil companies raised retail prices of petrol and diesel after maintaining the status quo since April 24. 

“Private fuel retailers have raised prices accordingly,” said the person quoted above.

Fuel retailing in India is dominated by the three state-run oil companies — Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL).

The two main private fuel retailers are Reliance Industries (RIL) and Essar Oil.

RIL is the only listed private fuel retailer. “For RIL’s size, holding prices for a few weeks will not have a huge impact. Even for its fuel-marketing segment, given that it has a presence in aviation turbine fuel (ATF) and similar bulk segments, a hit on the retail side can be absorbed,” said an analyst with a domestic brokerage firm.

According to the company, RIL’s bulk high-speed diesel market share rose from 5.3 per cent to 7.5 per cent in the March quarter.

According to the Petroleum Planning & Analysis Cell data, as of April, IOC operates 27,089 retail outlets, HPCL 15,062, and BPCL 14,447.

In the private fuel retail segment, RIL operates 1,400 outlets, Essar Oil 4,473, and Shell 108.

Though fuel retailers — state-run and private — raised prices on Monday, industry executives and analysts do not expect them to make up the shortfall that accumulated owing to the freeze. 

“The focus would be to ensure that marketing margins are in the range of Rs 1 to Rs 1.5 per litre,” said the analyst quoted earlier in the story.

As of December last year, the average marketing margin for oil firms was Rs 3.4 per litre for petrol and Rs 3.2 per litre for diesel. The margins, however, have been under pressure in the past one month owing to rise in crude oil prices and the reluctance of state-run oil companies to increase prices.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel