Development News Exclusive
By Bibhuti Pati
The Oil Marketing Companies (OMCs) are now duty bound to float news paper advertisement for appointment of retailers for selling petroleum products. Industry insiders conversant with the process opine that any advertisement resulting in 20% success in appointing new retailers is a great success. Further, the selection process itself is a strenuous process as each of the activity in it has a timeline. But the real test comes after a Letter of Intent ( LoI) is issued to a selected retailer. In a given advertisement of 250- 300 locations, which is generally the OMCs advertise in a given advertisement. Out of which a maximum of five to ten number dealers actually go on to be functional retailers. The process is not only long drawn but with many statutory provisions & compliances which at times become difficult to obtain. A retailer has to obtain no objection certificate from the Collectorate, Fire, explosives, panchayat & PWD or national Highway. Permission from NHAI even after engaging a consultant takes a couple of years. So each OMC need lot of time to own functional retailers.
The private players in the market now own less than five percent of ROs of a total of around 60000 ROs in the country. But they are ambitious & would like to own more number of ROs. Everybody knows that the Modi government has very good relations with the Reliance. There is a speculation in the industry circles that the government is creating a situation where many RO owners will be forced to leave the business as the “company wages” if enforced will make the ROs loss making entities. And such owners will be an easy prey for the private players. Even the government knows that the ROs will become unviable once company wages are enforced, yet to the officials are under tremendous pressure to enforce it just to drive a flock of retailers into the hands of private players. An insider, under conditions of anonymity believes that private players will add at least five thousand pumps to their kitty in a year, which otherwise would have taken them at least five years.
Stung by the stay orders given by the courts in favour of the retailers, the government has embarked on an ambitious drive to add another 25000- 30000 ROs in the near future. This will kill the industry. Consumer right activists may be arguing in favour of it as more the merrier. But running a RO entails high financial burden & if the profits dwindle because of numbers, many of them will become unviable, admitted a dealer. . The OMCs know which ROs are selling how much & they should add ROs where the volume is high, he added. Since petroleum dealership is a low profit margin business, volume is an essential which the ministry should not kill.
Another source admits that the company had announced 100% automation of ROs while enforcing the daily price change mechanism announced a year ago. But automation has really not taken off & in many places they are not working even after installation because of the sub standard equipments. The present mechanism to enforce new guidelines is a clever ploy to cover up the failures in adhering to its promises. The ACC committee report is yet to finalise the loss suffered by dealers due to evaporation & difference in temperature during loading & unloading. If that comes, dealers feel that their commission will be further hiked putting burden on the consumers. The ministry is silent over it.