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Centre to ease rules for setting up petrol pumps to attract private players

An expert committee has been set up to recommend ways to loosen the noose on fuel retailing licensing rules for setting up petrol pumps

Centre to ease rules for setting up petrol pumps to attract private players
Centre to ease rules for setting up petrol pumps to attract private players

New Delhi: In order to attract private players into fuel retailing and spur competition, the government is considering relaxing norms for setting up petrol pumps. An order released by the Oil Ministry said that an expert committee has been set up to recommend ways to loosen the noose on fuel retailing licensing rules.

The current norms require a company to invest Rs 2,000 crore in either hydrocarbon exploration and production, refining, pipelines or liquefied natural gas (LNG) terminals to be able to get a licence.

What’s the task cut out for the panel?

The panel includes economist Kirit Parikh, former oil secretary GC Chaturvedi, former Indian Oil Corp (IOC) chairman and IIM Ahmedabad director MA Pathan. It has been tasked to “review the existing architecture and extent of private sector participation in retail marketing of major transportation fuels in the country,” the order said. It will “identity entry barriers, if any, for expansion of retail outlets for private marketing companies.” The panel will also “look at various issues related to the implementation of existing guidelines for grant of marketing authorisation of market fuels - petrol, diesel and aviation turbine fuel (ATF).” The committee has been asked to furnish a report within 60 days after due consultations with stakeholders.

The goal is to spur competition

A senior official in the oil ministry said that the government wants to attract more private players into the arena and is willing to relax investment norms as well as the number of permissions needed for setting up a petrol pump. The expert committee will be required to make specific recommendations on the nature of the amendments required. The official said that the government is of the view that more players in the field would improve services and give consumers more choices. It may also lead to retailers competing with each other to offer the best price. Interestingly, the order comes in just a day after PSU Watch reported about Reliance and British Petroleum’s plan to 2,000 petrol pumps in India within the next three years. Reliance operates 1,343 petrol pumps in the country, while BP received a licence to set up 3,500 fuel retail outlets in India in October 2016.

The statistics

Currently, state-owned oil marketing companies — Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — currently own most of the 63,498 petrol pumps in the country. IOC claims a larger pie of the market share with 27,325 petrol pumps, followed by HPCL with 15,255 outlets and BPCL at 14,565 fuel stations. The list of private players includes Reliance Industries, Nayara Energy, formerly Essar Oil, and Royal Dutch Shell who control a small percentage of the total market share. Reliance, which operates the world’s largest oil refining complex, has less than 1,400 outlets. Nayara has 4,833 while Shell has just 114 pumps.