Search This Blog

Raising petrol prices

I used to buy fuel from Shell outlets even though it was couple of rupees more a litre. Recently, I noticed that the price differential between Shell outlets and other PSU outlets have increased to Rs8 per litre of petrol. Typically I fill 30 litres of Petrol and if I fill in a Shell outlet, I have to spend an additional Rs240 per filling. For that Rs240/- I can buy further almost 5 litres of petrol. Of course, I know there is a question mark on quality but the additional 5 litres will help me to get that additional mileage. From being a loyal customer of Shell, I have started buying petrol from other outlets.

I am also seeing the once "always busy" Shell outlets almost vacant nowadays. The patronage of Shell outlets have fallen to very low levels in chennai city. With a very high cost differential between PSU petrol pumps and Shell pumps, Shell is finding it difficult to sell retail fuel in India. The Government owned outlets are selling fuel at a lower price and incuring huge cash losses but they are compensated by the Government in the form of oil bonds. Reliance Industries, which has close to 1400 outlets in India, tried its best to get the Government subsidise the private retailers as well but Government has not accepted their request. It is very unusual to see a Reliance's request turned down by the Government in India. Reliance has taken a very bold and drastic decision that it would close down all their 1400 outlets across the country since it cant continue to subsidise petrol to end customers when it doesnt get any subsidy from the Government in the form of oil bonds.

Soon Shell may also close their retail outlets. Already I have seen couple of outlets in Chennai which are completely ready but not opened by Shell due to the adverse price situation in the retail market. I dont think Shell owns these outlets. These outlets are run on a Franchisee model similar to PSU outlets. Imagine the plight of a franchisee who has invested couple of crores of rupees in obtaining a Shell Franchisee but left in the cold.

There are newspaper reports already indicating that the Government is actively planning to increase the petrol prices as well as reduce the duty structure to enable the oil marketing companies to reduce their losses. You cant really blame the government for increase in the price of petrol. The crude has moved beyond 130 dollars a barrel and we still continue to enjoy a litre of Petrol at Rs49.51, the rate which was fixed by the Government when the crude was quoting at 85-90 dollars a barrel. I personally prefer the rates for Petroleum products to be determined as per the market prices rather than being administered by the Government. When we talk of liberalisation and opening up the economy, then we should also allow the prices to be determined by the market. It would be tough on me as person but lets accept the reality. Bad times ahead for consumers!!

1 comment:

Blogger said...


Get professional trading signals delivered to your mobile phone every day.

Start following our signals NOW and earn up to 270% per day.