Reliance may drop fuel retail plans

New Delhi: Reliance Industries Ltd is likely to drop its fuel retail plans due to shrinking sales.

Reliance has seen its market share fall to 2 per cent from 16 per cent at the start of the year after it raised prices of petrol and diesel in the past quarter.

RPL dealers have been given an option to get ready to suspend sales. They were given time till September 25 to respond on the issue.

Reliance assures them of 12.5 per cent per annum return on investment.

State-run refiners, which dominate the market, sell fuel at government-controlled prices and are compensated for losses.

But private retailers receive no such subsidies, and Reliance was forced to raise its prices as global crude rates surged.

Reliance's petrol and diesel prices are about 5 per cent more than those of state-run Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd.

Reliance runs 660,000 barrels per day refinery in Jamnagar and sells fuel through a network of 1,300 retail outlets.

Reliance has already wound up bulk supplies and is going slow on its aggressive plans to set up retail outlets across India.

Another private retailer Essar Oil Ltd has cut operations, while oil major Shell has set up only 13 outlets in the country.

India imports 70 per cent of the oil it consumes. To keep inflation in check, the Government does not allow state-run oil firms to raise retail fuel prices in step with oil prices.

India revised petrol prices by 9.2 per cent and diesel prices by 6.6 per cent in June.

The average import price had risen 12.3 per cent since the previous retail price hike in September 2005.