Consumers in India may soon be able to buy petrol and diesel from, say, an Ikea outlet, an H&M store or other general retail outlets. The ministry of petroleum and natural gas on Tuesday invited public comments on a proposal to allow firms other than oil companies to retail fuels subject to a minimum net worth criterion.
Earlier, a report submitted by an expert committee had suggested doing away with the conditions that require a company own and operate refineries with an investment of at least Rs 2,000 crore, or an exploration and production company to have at least three million tonne of crude oil production annually to be authorised to operate retail fuel outlets or sell aviation turbine fuel.
The move to allow firms other than oil companies to operate fuel retail outlets is in the wake of the lower-than-expected interest shown by Indian and foreign private oil companies to invest in the segment even after the de-regulation of auto fuel prices. Also, there is little evidence of real competition among the PSU retailers when it comes to pricing of petroleum products although all of them now sell branded fuels also. “For the companies operating in the oil and gas sector who have made or propose to make large investments in this sector, marketing right for transportation fuels does not appear to be an incentive. Hence the continuation of extant investment criterion for marketing authorisation to only the oil and gas companies is likely to deprive the market of participation from companies which may not be making huge investments in oil and gas sectors but may have varied offerings to make the market more customer-oriented,” the committee said in the report.
“This opens up the field for many firms. The format could be the same as that in the US, UK or European countries. Already Torrent, Total and Trafigura have shown interest,” said a person aware of the development.
The new entrants will be allowed to partner with any refiner and sell fuel under their brand name.
As on April 1, 2019, there were 64,624 fuel retail outlets in the country of which 57,944 are with the state-run oil marketing companies, 7 with MRPL, and 6,673 with private operators Reliance Petro Marketing, Nayara Energy and Shell India.
The new entrants will be allowed to source fuel from any of the refiners and sell its under their or refiner’s brand. However, to ensure that there are no fly-by-night operators, a company seeking retail marketing authorisation should have a minimum net worth of Rs 250 crore and should not fall below that level at any point of time during the tenure of the authorisation.
The companies will also have to make a commitment that 5% of the outlets will be in rural areas. In case a company does not want to open rural outlets, it will have to pay Rs 2 crore as upfront fee or furnish Rs 3 crore as bank guarantee per outlet which they will have to forfeit in case they fail to open rural outlets. Companies will also be required to specify the year-wise number of retail outlets it plans to set up subject to a minimum of 100 retail outlets in the next seven years from the year of grant of authorisation, failing which it will have to pay penalty.
It has also been recommended that considering retail and bulk business of marketing of transportation fuels are different in nature, companies who want both retail and bulk marketing should make separate applications for retail and bulk.
The committee was constituted in October, 2018 and the public can send comments in the next two weeks starting May 28, 2019.