IOC has also intimated Madras Refineries (MRL) that it would be glad to help out in its own retail plan but there has been no confirmation yet from the Chennai-based company. The ministry of petroleum and natural gas had recently given the two refining companies the go-ahead to set up retail outlets along the highways. The other marketing PSUs -- IOC, HPCL, BPCL and IBP -- were also asked to put up similar infrastructure to strengthen their already formidable retail network.

To MRL and CRL, this was the best piece of news given that they had been lobbying for years with the petroleum ministry for exclusive marketing rights. Their products are presently marketed by IOC, HPCL, BPCL and IBP. The two sole refiners were of the view that if they were not given the freedom to market theirproducts directly, it would be very difficult for them to survive in a deregulated scenario.

CRL has reportedly identified some potential sites in Kerala and IOC will help the company with the basic infrastructure along with accessories like a STD booth, restroom, restaurant. The petroleum ministry had reiterated that these outlets, termed jubilee outlets to commemorate 50 years of independence, would have these added frills so that they could cater to basic requirements of drivers who needed such amenities.

In fact, IOC has already commissioned nine such outlets in different parts of the country and plans to add 13 more by the end of this month. Work is on at a hectic pace to meet the deadline and sources say that the company is hopeful of making it on time. Indian Oil has targeted 100 more such outlets during the next financial and the present pace of activity indicates that it will be comfortably ahead of HPCL, BPCL and IBP.

The IOC angle in CRL is understandable as it has only recently entered intoa five-year agreement for exclusive marketing rights. It is but natural, observers say, that the two companies would now like to strengthen their relationship by working together on CRL's marketing outlets. However, the pace of work is expected to be relatively slow as such an exercise would require careful planning and a fairly high budget outlay.

In its turn, Madras Refineries is believed to have identified some sites near Chennai for its own retail outlet plan but is yet to accelerate the effort. Both IOC and BPCL are in the running for an exlusive marketing agreement and depending on the outcome of this tug-of-war, MRL would be in a better position to decide if it needs help for highway outlets.

The other factor that would play a part in the decision making is the Nitish Sengupta committee report which is expected to be submitted in a week to the petroleum ministry. The findings will determine the future of MRL, CRL and IBP as regards their alliance with stronger marketing companies like IOC, BPCL orHPCL. There is no way that the stand-alone refining companies can hold their own in a free market and the highway outlets will only be a modest beginning to get a feel of retail trade.

Insight

Move to yield better margins

With the setting up of retail outlets, Cochin Refinery and Madras Refinery will finally be able to sell their product directly. This is definitely a good move for the two refiners who will now be enjoying better margins. However, the number of retail networks in the initial period will be restricted, as the fund requirement will be very high. But the important point over here is that the two companies will have a head start over the other private-sector refineries.