Government may free fuel prices; price cuts likely

13 January 2009

The government is likely to free fuel prices from administrative control and allow state-run oil firms to charge market rates, in a move that will help private sector oil companies like Reliance and Essar to revive their fuel marketing and distribution business.

The union cabinet at its meeting tomorrow is also expected to announce another round of cuts in the prices of petrol, diesel and domestic LPG, petroleum ministry sources said.

Reliance Industries and Essar Oil have demanded that the government free retail fuel prices from administrative control and instead use fiscal measures to moderate prices for consumers.

Reliance is planning to set up around 5,850 petrol pumps, Essar around 1,700 outlets and Shell nearly 2,000 pumps.

State-run oil marketing firms operate over 34,300 distribution outlets across the country.

Reliance, which was operating about 2,400 petrol and diesel outlets in the country, had to shut all its outlets even as Essar and Shell restricted sales to just 100 and 50 outlets each after prices of crude oil skyrocketed in the first half of the previous year.