MUMBAI (TIP): Mukesh Ambani-led Reliance Industries (RIL) and Ruias-led Essar Oil are the biggest beneficiaries of the government move to partially deregulate diesel prices as state-owned oil firms were anyway being compensated by the government for selling diesel below cost price. The only difference for the state-owned oil marketing companies (OMCs) is that the government will start compensating less and the hike in price will be borne by consumers. When diesel prices were deregulated in 2003, private petro-retailers RIL, Essar & Shell were quick to grab up to 15% of diesel sales within two years. The management of these oil companies has now welcomed the government’s latest move to deregulate prices and is getting back to their drawing boards, chalking out strategies to regain market share in selling diesel, which accounts for 40% of the total refined fuel consumption.
Reacting to the partial deregulation, shares of RIL & Essar Oil quickly touched their 52-week highs of Rs 893 and Rs 78 respectively in a firm Mumbai market on Thursday. Essar Oil shares closed up 5% at Rs 77, while RIL shares closed up 3.4% at Rs 890 on Thursday. “The announcement of a partial deregulation of retail price of diesel by allowing PSU oil companies raise prices is a welcome move.
The need of the hour today is complete deregulation of fuel prices and allow market forces to set the benchmarks in tandem with global oil prices,” said Essar Oil managing director & CEO L K Gupta. He added that private oil marketing companies have invested substantially in setting up their retail outlets, but due to lack of a level-playing field, these assets were under-utilized. RIL and Essar Oil already sell petrol at their retail outlets at market prices, since petrol prices were deregulated last year. RIL, which gave tough competition to its public sector peers by grabbing a 12% market share in diesel by 2005, now operates just a third of its 1,470 retail outlets and sells petrol at par with its public sector peers. “Most of our city pumps are operational and we sell petrol at market rates.
Once the OMCs start selling diesel at market rates, we will open our highways pumps,” said a source. Essar Oil has a retail network of over 1,400 outlets nationwide with almost 200 more under various stages of completion. “Once price parity is reached between retail and market prices, it will not only benefit consumers by providing them choice, but also help in demand management of diesel. It will also be good for the economy, since a ballooning subsidy bill was threatening to derail the overall fiscal discipline, ,” said Gupta.