State-run oil companies seek carte blanche for pump spend

BANGALORE: State-run oil firms, preparing for fierce competition from private players like Reliance Industries, Essar Oil and Shell, have urged the oil ministry to grant them freedom to spend heavily in setting up new petrol pumps and demanded that the government should lift the recent order banning such investment by debt-ridden companies.

Indian Oil Corp ( IOC), Bharat Petroleum Corp ( BPCL) and Hindustan Petroleum Corp ( HPCL) have set up 10,236 retail outlets (ROs) in the past three years and purchased land at key locations along highways for new pumps, raising concerns in the oil ministry as their combined borrowings have soared to Rs 1.5 lakh crore.

Government officials also said they want to verify if the declared expenditure on pumps is inflated. “Oil marketing companies used to invest between Rs 20 lakh and Rs 2 crore on each pump, depending on location, etc. This money could be saved as people, mostly rich and influential, queue to for the dealership and willing to invest,” an oil ministry official said.

Last month, oil minister Veerappa Moily had rejected state oil firms’ justification that the expenditure is an incentive for dealers to remain loyal to them.

“The minister has instructed OMCs (oil marketing companies) to immediately stop providing financial incentives to private entities for setting up retail outlets because banks will give them loans if they outlets are commercially viable. And companies set up pumps only after ascertaining its viability,” the official added.