India Inc. at Digital Inspiration

Reliance Industries faces further front-end failure, to close its petroleum retail chain

Posted: 24 Mar 2008 10:19 PM CDT

Reliance Petrol Pump Reliance Industries is bearing the brunt in its last mile retail operations yet again. Fresh from its less than expected results in retail operations and 'Reliance Fresh' controversy, it is shutting its much popular petroleum retail outlets across India.

Of the 1400 retail pumps, all those outlets which are owned by Reliance would close down while those operated by dealer would continue to function. But in absence of any viable business plans, it won't be a while before the dealer owned outlets also decide to shut shop.

When Reliance outlets were started, it virtually created a stir among other state owned oil marketing companies as it was attracting heavy sales with a 14% market share in no time.

However with rising crude prices and absence of government subsidies, the failure was anticipated as it was not financially viable to run these outlets. Currently, Reliance was selling its petrol at Rs.6 and diesel at Rs.14 more than PSU companies.

The shutdown of Reliance pumps would signal an end to the plans of other private retailers such as Essar Oil and Shell. But the biggest loser would be the consumer as he would be deprived of healthy competition and be relied upon state owned companies for his petroleum needs.

The Government should had also given an equal hand and opportunity to PSU and Private companies, as the former are beneficiaries of oil bonds and discounts from upstream oil companies. As in this scenario, it won't be a while before the effect of such policy spills over to other industries like retail, telecom and financial services. via

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