Commodity Online

NEW DELHI: The Indian government on Wednesday that the move by private fuel companies like Reliance and Essar to close down their petrol pumps has put the Ministry of Petroleum in a difficult situation.

Yes, it is a big problem, and we have no ready solution right now, India's Oil Minister Murli Deora told reporters today. The statement came after reports that Reliance Industries is planning to close down nearly 1400 petrol pumps saying that they have become unviable because of huge losses.

Reliance plans to shut two third of its 1,400 petrol pumps in the country by next month, as it is unable to match the fuel price offered by state run retailers, who get compensated by the Government for selling fuel below the cost.

Companies like Reliance and Essar have demanded they should also get subsidy on par with public sector companies.

You don't expect the Government to give subsidy to (private retailers like) Reliance and Essar (Oil). But you also cannot expect them to be penalised, Dhe said.

Reliance and Essar make huge losses on selling petrol and diesel at prices higher than Indian Oil, Bharat Petroleum and Hindustan Petroleum. On an average, fuel at private outlets is costlier by Rs 4 to 5 a litre than the PSU pumps.

Public sector retailers too lose Rs 10.93 on sale of every litre of petrol and Rs 14.66 per litre on diesel but the losses are made up by issue of oil bonds by the Government and discounts from ONGC, GAIL and Oil India.

The same compensation is not given to the private retailers such as Reliance and Essar. Reliance still lost close to Rs 5 a litre on petrol and about Rs 8 a litre on diesel and had seen its market share fall from 14.3 per cent to less than a per cent in diesel.