Reliance Industries and Essar Oil plan to increase their fuel retailing presence in the country after demand for gasoline (petrol) and diesel crashed in the global market because of lower economic activity.
The private players will open another 1,400 outlets -Reliance 1,000 and Essar 400-this year, posing a tough challenge to the giant public sector retailers.
Reliance operates 400 outlets in the country at present, while Essar is much ahead with 1,400 outlets.
Reliance had 1,400 outlets in 2008, but shut down most of them after incurring a Rs 800-crore loss in its fuel retailing business in 2007-08 as its fuel rates were much higher than the subsidised prices of state-owned oil companies.
The government has recently rationalised the prices and the final piece of the lot was the diesel price deregulation in the last October.
A Reliance official says the number of retail outlets will increase to 1400, mostly by reopening the earlier shut down 1,000 outlets.
Reliance is currently operating company-owned retail outlets. About 500 properties used for the fuel retail business are owned by the Mukesh Ambani-controlled group. The remaining outlets are dealer-owned and dealer-operated.
Reliance is in negotiations with its dealers for reopening the pumps. But the dealers are fighting for higher commissions. They claim that the government's oil marketing companies offer better commissions than the private players. Issues will be sorted out soon, say the sources.
As for Essar, it is identifying locations for its new outlets, which are mostly outside the crowded cities. They are also trying different models to increase the number of outlets and to gain market share.
Now that petroleum prices have been deregulated, the private players have an edge since their advanced refineries can process the low-cost crude and achieve maximum efficiency.
Essar and Reliance can both process everything from cheaper extra heavy crude to light crude oil, which gives them a huge competitive advantage over older PSU refineries in India.