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Oil ministry authorizes new companies to sell auto fuel in the country

The Ministry of Petroleum and Natural Gas has given seven authorizations to companies to sell auto fuels in the country. These new approvals are in line with the revised 2019 guidelines for authorization for marketing of transport fuels. This is expected to intensify competition in India’s petroleum retail business.

According to a top ministry official, Reliance Industries (RIL) has been given a new marketing authorization under these norms. This is being done because the existing Retail Marketing Authority of RIL has been transferred to its subsidiary Reliance BP Mobility (RBML). This was necessary as the Mukesh Ambani Group has reorganized its petroleum into chemicals business. RBML Solutions India has been given one more authorization under these new rules.

Chennai-based IMC (once known as Indian Molasses Company), which specializes in oil terminals, also got approval to sell auto fuels in the country. It had competed for an discovered small field project during the second bidding round to explore and produce oil and gas from India. But IMC did not get any project. It currently provides liquid storage for several ports in the country. IMC is known for storing petroleum products, liquefied gases, petrochemicals, acids and vegetable oils.

Assam Gas Company, an Assam government undertaking primarily engaged in the gas transportation business, has got approval for retailing fuel. According to the company’s website, it has a network of underground natural gas trunk and distribution pipelines that serve about 400 tea factories, 1,000 commercial establishments, about 31,000 domestic consumers and several large industrial consumers in Tinsukia, Dibrugarh, Sivasagar, Charaideo districts does. Jorhat, Golaghat and Cachar in Assam.

Newly incorporated Onsite Energy has also received approval for petroleum retailing in India. According to regulatory filings, it was incorporated in May 2020 and has two directors, Shilpa Shekhar Borhade and Anish Ajit Kunkullol. The regulatory filing says the company is involved in service activities relevant to oil and gas extraction, excluding surveys. It is said to offer oil and gas field service activities on a fee or contract basis.

Emkay Agrotech and Manas Agro Industries and Infrastructure have also got fuel retailing authorization under the new rules. MK Agrotech is part of a diversified 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 LPG) and has also collaborated with Essar Petroleum (now Naira Energy) for supply of Ethanol Blended Petrol.

These new authorizations were given to companies with a minimum net worth of Rs 250 crore at the time of applying. If authorization is required for both retail and wholesale sales, the minimum net worth requirement was Rs 500 crore. As per the 2019 rules, for a retail authorization, a unit has to set up at least 100 retail outlets, of which 5 per cent should be in notified remote areas within 5 years of the grant of the authority.

“Essentially, it is difficult for these new entities to operate on a standalone basis, they will need back-end support from a company that already has the 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 get the entire value chain from fuel import to distribution point. So, they have to tie up with some big company which has such existing infrastructure. They have to ride on the big players,” BS Kant, former director (marketing at IndianOil) told Business Standard.

“After getting the licence, the big players may also be willing to tie up with them to leverage their experience. It is likely that affiliates will come. These may come in pocket and not on a pan-India basis,” he said.

India’s fuel demand has resumed from the lows of the COVID-19 pandemic and is expected to report positive growth over the previous year. About 90 per cent of the fuel retail outlets in the country are currently owned by public sector undertaking companies. The rest of the market is dominated by RIL and Naira Energy.

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