Reliance to cut fuel prices to revive sales

New Delhi, Sept 29 | Updated: Sep 30 2006, 05:30am hrs
Reliance Industries Ltd (RIL), which is selling petrol and diesel at Rs 2.50 a litre more than state-owned oil companies like Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, has decided to cut retail prices of petrol and diesel by about Rs 1-1.50 a litre.

The cut in petrol and diesel prices will bring partial respite to Reliance's dealers who have been shutting shop due to unviable operations and reducing fuel sales at their pumps. Following the cut, the difference between the fuel prices at the pumps of RIL's and state-owned oil companies will get reduced to Rs 1.50 per litre and sales from RIL's pumps are expected to improve.

Reliance is likely to announce this on Saturday and the new prices will come into effect from midnight on Saturday. RIL, which operates India's biggest refinery at Jamnagar, has been selling its petrol and diesel at a premium, which has resulted in a sharp fall in its fuel sales.

RILs market share plummeted to less than 2% early this month from a high of 16% in January this year.

RIL, which runs 1,300 petrol pumps across the country, has also been seeking a compensation package from the government in line with what is being given to state run oil firms. This includes subsidy sharing by upstream firms as also compensation from the government in the form of oil bonds. However, the government has so far denied such benefits to private retailers like Reliance and Essar.

Despite Reliance's decision to reduce fuel prices, there is going to be no change in the prices of fuel sold by other private retailers like Essar Oil.

Because unlike Reliance, Essar still does not have a refinery, which is operational and is sourcing its bulk fuel requirements from refiners like Numaligarh Refineries and Mangalore Refineries Private Ltd (MRPL).

The reduction is in line with the decline in global crude oil prices, which have slid by over $10 a barrel in the last one-month. The US light crude is currently trading below $63 a barrel after touching new highs of $78.40 in July.