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Wednesday, November 25, 2009

900 RIL petrol pumps are back in buzz

More than a year after they were mothballed, about 900 out of 1,432 petrol pumps under the banner of Mukesh Ambani's RIL are back in business and selling about 2,000 kl (kilolitres) of fuels per day. The reopened outlets are mostly owned and operated by dealers.

According to company's refinery business head P Raghavendran, most of these outlets are in the Western and Southern markets, and wherever possible, are selling fuels at the price being offered by state-run oilmarketers. The prices of governent firms are cheaper than market costs due to subsidy.

RIL had closed outlets in March 2008 since it could not match prices offered by the state-run firms through crude's high run. The government caps
motor fuel prices below input costs (international crude price) but gives its oilmarketers bonds to make up for losses.

Latest figures show state marketers are losing Rs 3.85 on each litre of petrol and Rs 3.71 on diesel. But
industry sources said Reliance dealers would be making some money even while matching state prices. They attributed the profit to the benefits accruing from product hedging by Reliance till December-end, done during recent low prices, and lower operational costs.

RIL had earlier sounded out HPCL and IndianOil, offering to sell its outlets or operate them under a JV. While HPCL had declined the offer, IndianOil conducted internal consultations but did not pursue it thereafter. RIL had garnered 16% of the diesel market, the largest-selling fuel, in a short span of time it had been in retail operation before shutting down pumps. The company has surrendered its only-for-export status for one of its two refineries in Gujarat's Jamnagar which is now being used to supply fuel to its outlets.

Raghavendran said the model of permanently adopting such a large subsidy programme such as in the fuels business is not sustainable for the economy

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