India: RIL Sees HPCL as Option for Petrol Retail Deal

HPCL has issued a limited tender to five merchant bankers to advise it on the deal.  Last year, RIL closed 1,400 petrol pumps (900 owned by the company and the rest managed by dealers) after losses mounted to unmanageable levels, with fuel prices rising to all-time high of $146 a barrel in July 2008.

At the time, RIL was charging Rs 4-5 a litre more for petrol than the public sector oil marketers, Indian Oil Corporation, Bharat Petroleum and HPCL, and still making losses on sales. The state-run marketers also lose money selling petrol and diesel at government-dictated prices, but are compensated by tradable government bonds and discounts from public sector oil producers such as Oil and Natural Gas Corporation.

Private companies such as RIL and Essar Oil do not get such compensations and so, had to close their retail outlets. “HPCL can recover the losses it makes on selling oil for less than the cost price from the government, so it is feasible for the public sector marketer to run RIL’s closed petrol pumps,” said a person familiar with the situation. HPCL officials declined to comment. RIL did not respond to emails on the issue for two days. “HPCL could lease RIL petrol pumps. This will also help RIL earn a return on its assets,” the source said.

PetrolWorld 050308