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Reliance to sell petrol, diesel in refinery backyard

Hemangi Balse

Reliance Industries is set to enter the business of marketing transportation fuels - petrol and diesel - through 500 retail outlets that fall within a 300 km radius of its 27-million tonne refinery at Jamnagar in Gujarat.

This follows the dismantling of the administered price mechanism for transport fuels. Private oil companies can now enter the marketing business on their own. So far, they had to depend on the marketing network of state-owned oil companies.

Reliance's retail outlets are expected to come up within 18 months. Reliance was buying land for these outlets through a closely held company, oil industry sources said.

A Reliance spokesperson refused to comment on the company's strategy.

These "refinery-backyard outlets" are expected to help Reliance market its petrol and diesel effectively and at an optimal cost. "Reliance will be able to maximise sales through these backyard outlets as it will be able to save on freight, which is a very high component," sources indicated.

Through its retail network, Reliance is targeting high consumption pockets such as Gujarat, Maharashtra, western Madhya Pradesh and southern Rajasthan.

Besides, a few outlets are also in the offing in a few strategically located coastal cities and towns such as Mangalore, Chennai, Kolkata and Visakhapatnam. Both Hindustan Petroleum and Bharat Petroleum have a strong presence in the western region and Reliance could chew into their markets.

"Reliance is not foraying into major metros such as Mumbai because the cost of land is prohibitive. The blueprint for retail outlets is only till Panvel, 40 km away from Mumbai," the sources added.

Interestingly, Larsen & Toubro, the engineering and cement conglomerate, has drawn up the blueprint for the proposed retail network. However, L&T executives, too, were not available for comment.

Analysts said Reliance would be able to market petrol and diesel at its refinery backyard outlets "cost-effectively".

Explaining the concept of refinery backyard outlets, analysts claimed that "Reliance does not have a pipeline of its own to transport fuel to inland areas. So it will have to transport them through railways and roads. It will not be feasible for Reliance to adopt the latter route as it will not be feasible to market fuels beyond 300 km from its refinery," analysts claimed.

Reliance has signed a two-year agreement with the three state-owned oil companies, Indian Oil, Hindustan Petroleum and Bharat Petroleum, for them to buy and market its products. The three PSUs will together lift 13-million tonnes of petroleum products from the Jamnagar refinery.

This is an interim arrangement and will exist till Reliance sets up its distribution network. It may not need to set up a huge network either, if it bags one of the oil companies that the government wants to unload.

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