Govt relaxes fuel retailing policy, opens market to non-oil firms
24 October 2019
The government on Wednesday announced a major shift in the transportation fuel marketing policy by easing entry norms and allowing entry for non-oil companies, opening the market hitherto dominated by state-run oil marketing firms to price competition.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved a review of the guidelines for granting authorisation to market transportation fuels, marking a major reform of the guidelines for marketing of petrol and diesel.
The step will assure foreign investors about the Narendra Modi government's commitment to market-driven economy at a time the Centre is planning to hive off India's second- and third-largest fuel retailers - BPCL and HPCL.
With this, newer players like Adani, Total and Saudi Aramco — and even super markets — can open outlets for selling automobile fuel.
Entities seeking authorisation will now need to have a minimum net worth of Rs 250 crore only against Rs2,000 crore earlier. Authorised entities will, however, have to meet certain conditions such as setting up a minimum 5 per cent of their retail outlets in the notified remote areas within five years of grant of authorisation.
Besides, these entities will be required to install facilities for marketing at least one new-generation alternative fuel, such as CNG, LNG, and biofuel, at their retail outlets within three years of operationalisation of outlets selling conventional fuel.
The biggest fuel market reforms since the deregulation of oil pricing by the Atal Bihari Vajpayee-led government in 2002, the new policy will give a fillip to ‘ease of doing business’, with transparent policy guidelines.
It will boost direct and indirect employment in the sector. Setting up of more retail outlets (ROs) will result in better competition and better services for consumers, a cabinet release stated.
The new policy will result in much lower entry barrier for private players.
The revised policy proposes the following:
- Entities seeking authorisation would need to have a minimum net worth of Rs250 crore vis-à-vis the current requirement of Rs2,000 crore prior investment;
- Non-oil companies can also invest in the retail sector. Requirement of prior investment in oil and gas sector, mainly in exploration and production, refining, pipelines/terminals etc, has been done away with;
- Entities seeking market authorisation for petrol and diesel are allowed to apply for retail and bulk authorisation separately or both;
- The companies have been given flexibility in setting up a joint venture or subsidiary for market authorisation;
- In addition to conventional fuels, authorised entities are required to install facilities for marketing at least one new generation alternate fuel, like CNG, LNG, biofuels, electric charging, etc at their proposed retail outlets within 3 years of operationalisation of the said outlet;
- The new entities are expected to bring in latest technology for marketing of fuels and also encourage digital payments at the ROs;
- Entities will also encourage employment of women and ex-servicemen at the retail outlets;
- CCTV facilities will be set up at all retail outlets;
- Authorised entities are required to set up minimum 5 per cent of the total retail outlets in the notified remote areas within 5 years of grant of authorisation. A robust monitoring mechanism has been set up to monitor this obligation;
- An individual may be allowed to obtain dealership of more than one marketing company in case of open dealerships of PSU OMCs but at different sites.
The policy for granting authorisation to market transportation fuels has not undergone any changes over the past 17 years since 2002. It has now been revised to bring it in line with the changing market dynamics and with a view to encourage investment from private players, including foreign players, in this sector, a cabinet note stated.
The government had, in March, set up a committee to review the 2002 guidelines on grant of transport fuel-marketing licence and the new policy is in line with its recommendations.