At a time when rising fuel cost is already pinching customers across the country, Delhi users might cease to enjoy the benefit of paying the lowest prices for motor spirits among metro cities, as fuel retail outlets across the capital face the threat of higher rentals to be paid to the Delhi Development Authority (DDA). While oil marketing companies (OMCs) are contesting DDA’s decision to increase the land rentals, effective 2007, in the Supreme Court, they have already paid 50% — around Rs 600 crore — of the claim made, and the rest might have to be paid along with interest. A government official said though OMCs have not yet passed on the cost to consumers, the moment lease rentals go up, prices will go up in Delhi. “Fuel pricing is formula based. Till the refinery level, pricing is indexed with international prices, but after that it is cost plus taxes, transportation and other such costs added and passed on to consumers,” said the official. While the price of petrol in Delhi on Thursday was Rs 70.66 per litre, it was Rs 78.55 in Mumbai, Rs 73.40 in Kolkata and Rs 73.25 in Chennai. Almost 90% of the fuel outlets in Delhi are located on ‘A-site’, wherein land is procured by OMCs from DDA and asset is built, which is then operated by a dealer. This is unlike other cities, where a ‘B-site’ is more common, wherein the dealer provides land and OMCs develop basic facilities and tanks to be operated by dealers.
In comparison, around 20,000, or 36%, retail outlets across the country of the 55,000-odd are on A-site. An OMC executive close to the development claims that the additional rental burden in Delhi will make retailing unviable at the current fuel prices. “If we compare, these are the highest commercial rates across the country,” the executive added. In Delhi, no private land is used for operating retail outlets and DDA provides land to OMCs, which then passes them to dealers. DDA has increased the lease rental for fuel outlets by putting them in commercial category, same as that of, say, a mall. “Companies are contending that this is not a commercial venture in entirety and it is an essential product that they are marketing,” said the government official. The OMC executive echoed the same view. The country’s capital has hardly seen any new fuel retail outlets in the past couple of years because of the pending decision and saturation.