ONGC scraps retail plan

Low-to-negative margins on the sale of petroleum products have forced some companies to scrap their retail expansion plan, while others have chosen to go slow.  India’s largest upstream company – Oil and Natural Gas Corporation (ONGC) – which was planning to add 600 outlets to its existing single outlet, has dropped its retail plans altogether “because of the current pricing situation, ONGC Chairman and Managing Director R.S. Sharma told Business Standard.  Market shares in petrol retailing from April-November 2006 reveal that the traditional big retailers Indian Oil Corp., Bharat Petroleum and Hindustan Petroleum – have all lost ground.  After the dismantling of the administered price mechanism (APM) for petroleum products in 2002, the government had opened up the market for retailing of petroleum products for companies which had invested Rs2,000 crores (US$451.16 million) in the sector.  Private sector player Reliance Industries has a license to open 5,849 outlets, while Essar Oil and Shell were given the go-ahead for 1,700 and 2,000 outlets respectively.  Data till the end of September 2006 showed that Reliance owns 1,287 outlets, while Essar and Shell have opened 514 and 17 outlets, respectively.  The companies decided to go slow when they were forced to sell products at prices higher than that offered by the state-owned companies who receive government subsidy. (January 3, 2007)