HPCL eyes tie-up with Reliance to expand oil retailing biz.

State-owned oil marketing company Hindustan Petroleum Corporation Ltd. is looking at a possible tie-up with Reliance Industries Ltd. to expand its oil retailing business.

With retail diesel prices inching towards market rates, and petrol already de-regulated, the oil retailers are now reviewing their business strategies.

HPCL is keen to expand its retailing operations, while Reliance Industries, having burnt its fingers earlier, wants to reduce its risks.

Reliance Industries, led by Mukesh Ambani, maintained that it is always looking for business opportunities, while HPCL termed the move 'very preliminary'.

An official in the Ministry of Petroleum & Natural Gas said: 'What we understand is that HPCL is doing due diligence. A final call will be taken subsequently'.

This is not for the first time that Reliance Industries has been in talks with a PSU oil retailer. In 2009, too, it had held parleys for a joint venture. Reliance's move was triggered by the Government's control over auto fuel pricing, which is distorting the economics of the company's business.

Today, only about 200-215 Reliance Industries retail outlets are operational, mainly in Gujarat. But the company had to shut down 1,400 retail outlets. Investments worth Rs. 5,000 crore are stuck in Reliance Industrie's existing infrastructure.

While the PSU retailers are compensated by the Government for selling fuel at a controlled price, there is no such mechanism for private players.

The Government had decided to stagger the increase in diesel prices by about 50 paise a litre every month. Currently, the under-recovery on diesel is Rs. 1.78 a litre.

The staggered hike has also busted the myth that the increase in cost would impact industrial and retail consumption. Diesel demand for July actually registered a 6.25 per cent increase, year on year.

According to the Ministry, diesel has a weightage of 4.67 in the wholesale price index - for every Rs. 1 increase in the diesel price, the WPI index is estimated to rise by 0.09 per cent.

Despite talks of possible decontrol, players such as Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Essar Oil and Shell are still being cautious, as the issue of diesel pricing - whether de-controlled or not - has political implications.


HBL