The lucrative Indian fuel retail space may be looking at some major reforms in the near future, with the Ministry of Petroleum and Natural Gas mulling a proposal to relax existing entry requirements. If the Modi government goes ahead with the proposal, you may soon be able to buy petrol, diesel from supermarket. The move will also open the gates for multi-brand retail majors such as Future Group and Reliance Retail as well as global players such as Saudi Aramco, Total and Trafigura to enter the booming business.
A source in the know told The Economic Times that the ministry has readied a Cabinet proposal to scrap the nearly two-decade-old rule of restricting the licence to market petrol, diesel and jet fuel to companies that have invested - or propose to invest - Rs 2,000 crore in exploration and production, refining, pipelines or terminals in the country. This high entry investment threshold has long deterred foreign players aiming to grab a share of India's rapidly expanding fuel market. Demand for petrol went up 8 per cent in the last fiscal alone, while that for diesel and jet fuel jumped 3 per cent and 9 per cent, respectively.
The cabinet note has reportedly adopted most of the key recommendations of an official panel constituted in March to review the 2002 guidelines on grant of transport fuel marketing licence. The panel's report, submitted in late May, favoured ending the basic infrastructure investment requirement and instead imposing a minimum net worth bar for licence-seekers. A company seeking fuel retailing licence must have a minimum net worth of Rs 250 crore while those seeking a bulk marketing licence must boast a net worth of at least Rs 500 crore, the panel recommended.
Companies seeking licence must set up at least 100 retail outlets, of which at least 5 per cent should be in notified remote areas, within seven years of obtaining the licence. Furthermore, the panel suggested opening up the sector to non-oil companies, implementing strict timelines for setting up petrol pumps, and penalties for not meeting the rollout plan. The oil ministry is currently consulting the finance, commerce and law ministries on this matter.
Foreign players could be the immediate beneficiaries of this proposed change in the licence rule. "Saudi Aramco recently wrote to the oil ministry that it's keen on fuel retailing in India," a source told the daily, adding that the state-owned oil company of the Kingdom of Saudi Arabia is probably waiting for the rules to change before submitting a formal application. The Gulf behemoth has been in talks with Reliance Industries for a minority stake in its refining assets. It is also partnering Indian oil PSUs for a proposed 60-million-tonnes a year refinery in Maharashtra. Oil trader Trafigura also stands to benefit from the proposed relaxation of norms. Late last year, India had rejected Trafigura's plea for a fuel marketing licence on grounds that its purchase of stake in a refinery in Gujarat in 2017 did not qualify.