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Thu 24 Oct 2019 02:40 PM

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India eases norms for fuel retail, allows entry of non-fuel companies

India's fuel marketing is currently controlled by state-owned petroleum refining and marketing companies

India eases norms for fuel retail, allows entry of non-fuel companies

India's government has relaxed norms for setting up fuel stations in the country, allowing non-oil companies to enter fuel retailing in the country.

Companies with a net worth of $35.2 million (Rs 2.5 billion) will be allowed to sell petrol and diesel subject to a condition that they install facilities to market at least one alternative fuel such as CNG, LNG, biofuels or electric vehicle charging within three years of beginning operations, according to the decision approved by India’s cabinet.

Under the existing norms, a company needs to invest about $282 million (Rs 20 billion) in hydrocarbon exploration and production, refining, pipelines or liquefied natural gas (LNG) terminals to obtain a fuel retailing licence in India.

Oil sector experts said although it is a welcome move and is in line with the practice of fuel being available even at shopping malls in developed countries, it will be a long-haul for India to reach that stage.

“Sourcing the fuel, in the absence of third party storage facilities in India, will be a major challenge faced by companies which want to enter this sector,” Amit Kumar, sector analyst and Partner with PwC India, told Arabian Business.

India’s fuel marketing is currently mainly controlled by state-owned petroleum refining and marketing companies. Although private players including Reliance group and Royal Dutch Shell are also present in the sector, their share in the market is insignificant.  

Global oil companies such as Saudi Aramco, Trafigura’s downstream arm Puma Energy and France’s Total are among the international biggies who are interested in setting up fuel stations in India, which is projected to see rising demand for fossil in the years to come.

Total, in partnership with Adani Group, had in November 2018 applied for a licence to retail petrol and diesel through 1,500 outlets.

BP, which had secured secured a licence to set up 3,500 pumps some time ago but did not go ahead with it, has now joined hands with RIL to scale up its present network of fuel stations to 5,500, while Puma Energy had applied for a licence.

Saudi Aramco, which has recently struck a deal with Mukesh Ambani-led Reliance Industries to acquire 20 percent stake in the group’s refining and petrochemical business, is also said to be keen to enter the fuel retail sector in India.

State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum currently own most of the 65,554 petrol pumps in the country.

Reliance Industries, Nayara Energy  - formerly Essar Oil, co-owned by Russia’s Rosneft and an investment consortium led by Trafigura & UCP Investment Group, and Royal Dutch Shell are the private players in the market but with a limited presence. Reliance has less than 1,400 outlets. Nayara has 5,344 outlets, while Shell has just 160 pumps.

While petrol and diesel are decontrolled fuel in India, the prices of natural gas are set for a 6-month period based on an approved formula.

The EV charging station unit cost is set by the respective state electricity regulatory commissions for public charging stations.

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