Empty advice

Updated: Jan 2 2006, 05:30am hrs
The governments analysis that the public sector oil retailing units are losing market share to private sector Reliance is on the dot. However, their advice to the companies to think out of the box and not simply increase the number of outlets means little. For, governments price clamps have shackled the oil companies, turned them into mere distributors and stifled their marketing skills. It is a fact that a monopoly player will lose market share to new entrants. However, in this case, loss in market share is significantly aided by the governments pricing policy that remunerates them at frozen, below market, prices.

Importantly, the data provided by marketers shows that there has been no growth in diesel demand since the beginning of this fiscal, while there has been robust 10% growth in light commercial vehicles. Agreed, the growth in medium and heavy commercial vehicles has been hovering around 1%, but the fact remains the hub-and-spoke model in the transportation sector is gaining strength and driving up diesel consumption.

There is no denying that Reliances growth has also been on the back of the loss of credibility of PSU dealers. Of the 30,000 strong PSU outlets, there are only a handful of company-owned outlets (around 100), and these sell as much as Reliance outlets. Which clearly goes to show that the oil companies have not been able to adequately check the malpractices adopted by retailers, a sizeable segment of which owe their allotment to political patronage. The need of the hour is now to weed out the baggagecrack down on adulteration of diesel and summarily cancel errant dealerships. For, only a sustained demonstration effect will restore public confidence in the dealerships. Also, kerosene, the key diesel adulterant, needs to be priced at market levels. And, the governments move to offer differential pricing based on income levels is a soft option that is unlikely to stop the leakages. Clearly, there is enough for the oil PSUs to do and there is enough work for the government to undorelease price controls.