Financial Daily from THE HINDU group of publications
Tuesday, Mar 19, 2002
Industry & Economy - Petroleum
Free market throws up new equations -- Essar offers to market Reliance petro products
MUMBAI, March 18
TILL yesterday, the Ruias of Essar avoided the Ambanis of Reliance. Today they are at hand-shaking distance, with Essar Oil, officially writing a letter about three days ago offering to market petroleum products made by Reliance. Both the companies have confirmed the development.
As its refinery is way behind completion, Essar Oil has decided to enter marketing at the earliest with others' products.
The company is eligible to market petro products under the post-APM dispensation. The Government recently announced the eligibility criteria for companies marketing petro products, under which both Essar and Reliance are qualified.
Essar has two options: either source petro products locally - from oil PSUs or from Reliance - or import them. Currently, domestic supply of petro products is in excess of demand and some products are being exported. The glut in the domestic market makes procuring petro products locally a better option.
Reliance's own plans for setting up a marketing network are under wraps as it would depend on the fate of its arrangement with IOC and the company's strategy to acquire BPCL or HPCL - which are slated for disinvestment. However, according to sources, the company has already started identifying locations.
Essar, it is learnt, is yet to get a reply from Reliance. But according to sources, the Ambanis may not mind selling products to the Ruias so long as the arrangement does not disrupt their own petro product marketing plans.
"We will market Reliance products if they are available at import parity prices," said an Essar Oil official.
Focussing on western and northern markets initially for its retail outlets, Essar will also be approaching public sector refineries for products. "Since there is a glut in motor spirit and high-speed diesel supply, we do not foresee any problem in procuring products indigenously. In any case, we are also prepared to import should the need arise," said the Essar official.
Essar has announced plans to set up around 1,700 retail outlets over the next two to three years. "We have received over 9,000 applications which are being shortlisted for on-site inspections," the official said.
Initially, the company will have franchisee arrangements to save on capital investment. Essar also plans to tap bulk consumers for direct supply of products.
"If everything goes as planned, we will have our first retail outlet by the end of this year or early 2003," the official said. Essar's retail outlets will also sell major brands of lubes, for which the company would tap domestic and international manufacturers.
An Essar spokesman said the retail outlets being designed by the company, would have several facilities such as ATMs, spare part shops, rest rooms, motels, etc.
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