Fuel retailing unsustainable, says Reliance-BP on price freeze

NEW DELHI: Reliance BP Mobility Ltd (RBML), the joint venture of Reliance Industries Ltd and BP, has told the government that fuel retailing for the private sector in India has become unsustainable as market-controlling public sector firms frequently freeze petrol and diesel prices at rates way below cost, people aware of the development said.

Despite a surge in oil prices, state-owned Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) first froze petrol and diesel rates for a record 137 days beginning early November 2021 when five states, including Uttar Pradesh, went to the polls, and last month again went into a hiatus that is now 47 days old.

“They has written to the petroleum ministry over the fuel pricing issue,” said a highly placed official in the government, who did not want to be quoted.

RBML is scaling down its retail operations to cut some of the Rs700 crore loss it is incurring every month, but Russia’s Rosneft-backed Nayara Energy has raised prices of petrol and diesel by up to Rs3 a litre over and above the public sector undertaking (PSU) rates, to cover for some losses.

The government over the weekend cut excise duty on petrol by Rs8 per litre and by Rs6 a litre on diesel. This reduction was passed on to the consumers and not adjusted against the under-recovery oil firms make on selling petrol and diesel.

Two people aware of the matter said RBML contends that PSU oil marketing companies control more than 90% of the market and are the price-setters, leaving no room for private fuel retailers in fixation of the retail selling price of petrol and diesel.

PSUs have not increased fuel prices in line with escalating international crude prices eventually leading to huge under-recoveries (losses) for all fuel retailers since February 2022.

As of May 16, 2022, net underrecoveries in the industry were Rs13.08 per litre for petrol and Rs24.09 per litre for diesel.

The ministry is going to reply to RBML said one of the people mentioned above, but did not elaborate what it is going to say.

Petrol and diesel prices are decided by the PSU oil companies after considering not just the international oil prices but also gains from other businesses such as petrochemicals and oil refining, a senior oil ministry official said.

“Reliance is exporting diesel to Europe and other countries at highly lucrative prices but rationing supplies for its petrol pumps,” the official said.

An industry official, however, said the inference the ministry is drawing is incorrect.

Reliance owns and operates two refineries, including one only meant for exports, at Jamnagar in Gujarat. BP has no equity shareholding in them.