India: Essar Oil to Expand Petrol Retail Network

Essar Oil will double its distribution network to 3,000 outlets by the middle of 2011, according to the company's CEO for oil marketing, S Thangapandian.

 The firm had shut down all its 1,275 petrol outlets in early 2008 owing to a spike in crude oil prices, but it re-opened them late last year after crude prices eased. Unlike public sector companies, Essar cannot sell oil products below cost in anticipation of government subsidy when crude prices go up.  Thangapandian said the company has decided to go full throttle on its retail strategy, in anticipation of deregulation of fuel prices. "In fact, starting Thursday, we have reduced prices of petrol and diesel in eight states to the same level as public sector companies," he said.

Thangapandian said Essar has decided to go ahead and make further investments into the petro-retail business on expectations that the government will implement its deregulation promise. The company currently has 300 outlets under construction and expects to take its network to 1,500 service stations by March 2010.

Essar Oil, along with Reliance Industries and Shell, had acquired oil retailing licences in 2002-03 in return for investments in upstream sectors such as refining and exploration. The government had promised that oil companies will be free to fix retail prices of petroleum products from April 2002 and price control would be done through manipulation of taxes, rather than by capping prices.

The Parikh Committee, headed by former Planning Commission member Kirit Parikh, is the third committee set up by the UPA government to suggest ways to resolve the issue of petroleum subsidies and pricing. Recommendations of the earlier committees are yet to be implemented.

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