The Ministry of Petroleum and Natural Gas has granted seven permits to companies for the sale of automotive fuels in the country. These new approvals fall under the relaxed guidelines for the authorization to market transport fuels which were revised in 2019. This is expected to make competition more intense in the retail petroleum industry in India.
According to a senior ministry official, a new marketing authorization has been granted to Reliance Industries (RIL) under these standards. This is done because RIL’s existing retail marketing authorization has been transferred to its subsidiary Reliance BP Mobility (RBML). This was necessary since the Mukesh Ambani group reorganized its petroleum-chemical activity. Another authorization has been granted to RBML Solutions India under these new rules.
Chennai-based IMC (formerly Indian Molasses Company), which specializes in oil terminals, has also obtained approval to sell automotive fuels in the country. He had competed for a small field project discovered in the second tender to explore and produce oil and gas in India. But IMC couldn’t bag a project. It currently offers liquid storage for several ports in the country. IMC is known for the storage of petroleum products, liquefied gases, petrochemicals, acids and vegetable oils.
Assam Gas Company, an Assam government enterprise primarily engaged in gas transportation, has obtained approval for the retail sale of fuel. According to the company’s website, it has a network of underground natural gas and distribution pipelines that serves around 400 tea factories, 1,000 commercial establishments, around 31,000 domestic consumers and several large industrial consumers in the regions. Tinsukia, Dibrugarh, Sivasagar, Charaideo, Jorhat, Golaghat and Cachar districts in Assam.
The new company Onsite Energy has also obtained approval for the retail sale of petroleum in India. According to regulatory documents, it was incorporated in May 2020 and has two directors, Shilpa Shekhar Borhade and Anish Ajit Kunkulol. Regulatory documents indicate that the company is involved in service activities incidental to oil and gas extraction, excluding surveying. It is said to offer service activities on the oil and gas fields on a lump sum or contractual basis.
MK Agrotech and Manas Agro Industries and Infrastructure have also obtained fuel retail licenses under the new rules. MK Agrotech is part of a diverse conglomerate with interests in agricultural products such as sunflower oil, real estate, and crude oil and gas extraction. Manas Agro Industries and Infrastructure has its own brand of liquefied petroleum gas (LPG or cooking gas) and has also collaborated with Essar Petroleum (now Nayara Energy) for the supply of gasoline blended with ethanol.
These new authorizations were granted to companies with a minimum net worth of Rs 250 crore at the time of application. In case authorization is required for retail and bulk sales, the minimum net worth requirement was Rs 500 crore. According to the 2019 rules, for retail authorization, an entity must create at least 100 retail outlets, of which 5% should be in the remote areas notified within 5 years of the granting of the authorization.
“Essentially, it is difficult for these new entities to operate on their own, they will need the back-end support of a company that already has an infrastructure. Since they are not in the refining of crude oil, they will have to depend on imports and it will be difficult for them to set up the entire value chain from importing fuel to the point of distribution. Thus, they will have to partner with a large company with such an existing infrastructure. They will need to bring in bigger players, ”BS Kanth, former director of Marketing at IndianOil, told Business Standard.
“Having obtained the license, even the biggest players may want to partner with them to capitalize on their experience. It is likely that collaborative entities will emerge. These can appear in pockets and not on a pan-Indian basis, ”he added.
India’s fuel demand has rebounded from the lows of the COVID-19 pandemic and is expected to register positive growth from last year. About 90 percent of the nation’s fuel retail outlets are currently owned by public sector companies. The remaining market is largely dominated by RIL and Nayara Energy.