OMCs’ expansion plans face Kerala hurdle

NEW DELHI: Even as governmentowned oil marketing companies (OMCs) gear up for the re-entry of Reliance Industries Ltd (RIL) and Essar Oil, existing fuel pump owners in Kerala are fighting to protect their turf as losses are mounting.

“Till now about 10 owners have committed suicide, as they were unable to pay off loans taken to buy land,” said Thomas Vaidyan, the president of the All Kerala Federation of Petroleum Traders.

Pump owners in the state say that in addition to RIL and Essar, the OMCs want to open around 1,500 new outlets, even as 70% of the existing 2,000-odd outlets in the state are losing money, as there is not enough business.

Vaidyan blames the situation THOMAS VAIDYAN, president,

All Kerala Federation of Petroleum Traders

on a haphazard mushrooming of pumps in the last 5-6 years. Pump owners want the OMCs to frame and adhere to guidelines on how and where pumps are to be set up and the matter is pending before the Supreme Court.

He said that the situation is pronounced in Kerala for two AMARESH KAPOOR, former zonal marketing head, Indiam Oil Corporation

reasons: first its small geography and the exorbitantly real estate costs. “It costs about `1 crore to buy land in cities and `40-50 lakh in rural areas.”

While none of the OMCs or the oil ministry responded, a recently retired zonal marketing head at Indian Oil, Amaresh Kapoor, said that competition among themselves has meant that OMCs are in a “dilemma” as to where they should open their outlets.

Kapoor, however, does not think that the business anywhere has faced widespread losses that would lead owners to commit suicide. “If they were really losing money, they would close shop.”

Pump owners further say that land lease agreements, which typically have a lock-in period of 30 years, are skewed in favour of the OMCs as they cannot sell out. At best, they can either bring in a partner or close shop.

Kapoor said that in Uttar Pradesh between 4,000 and 4,500 new outlets could come up. He said that especially IOC, which has 50% of the marketshare has no choice but to open more outlets, just to maintain its marketshare.

Till now 10 owners have committed suicide, as they were unable to pay off loans taken to buy land ... It costs about `1 crore to buy land in cities Network of pumps has reached 50,000, but I have never seen a dealer wanting to exit because he has no businesss ... If they were really losing money, they would close shop