IOC plans to buy its retail outlets

Mumbai: Although dismantling of the administered price mechanism in the oil sector is still a good six months away, oil companies have already begun taking steps to counter threat from open market competition.

Reports suggest that Indian Oil Corporation, which owns only 28 per cent of the retail outlets operating under the IOC umbrella, has offered to take all its retail outlets on lease. IOC is willing to pay anything between Rs 2.50 crore and Rs 3.50 crore to the present owners for taking retail outlets on a 100-year lease and then giving them back to the owners to operate them.

Almost 72 per cent of the existing retail outlets of IOC operate under dealer-owned and dealer-operated (DODO) system. IOC feels that once the oil sector is completely liberated from the control of the government, then their DODO retail outlets could fall prey to incentives, which the other players would offer and compete with IOC.

IOC has reasons to feel threatened, considering the fact that it controls almost 70 per cent of the retail market and almost 55 per cent of its business comes from these DODO retail outlets. The other two state-owned oil majors, Bharat Petroleum and Hindustan Petroleum, own 58 per cent and 47 per cent respectively of the retail outlets that operate under their umbrella. The Indo Burma Petroleum Company owns roughly 54 per cent of the retail outlets.