Shell India is the second private sector petroleum company to review its expansion plans in India. The company has decided not to open any more petroleum outlets.
Reliance Industries was the first to announce a reduction in the number of petrol pumps following the government's persistent refusal to grant subsidy to private companies on a par with public sector retail oil companies.
Oil spill
- Government's refusal to grant subsidy to private companies on par with public sector retail companies has blocked Shell India's expansion plans
- The company has also asked some of its employees to start looking for another job
- Reliance Industries has already planned to reduce the number of petrol pumps by three-fourths
Though Shell is not planning to shut down any of its its existing petrol stations yet, the company has asked some of its employees to start looking for another job.
"Some employees undergoing training are being asked to look elsewhere, with due compensation being given to them according to their contract. But some have also been absorbed at existing sites," Deepak Mukarji, head of corporate affairs, Shell India, told Business Standard.
Shell has 50 petrol pumps across the country and has a licence to open 2,000 pumps.
Joining Reliance and Essar, Shell has also filed a petition with the regulator to provide a level playing field. This includes access to oil bonds issued by the government to underwrite the subsidy cost of selling petroleum products at a concessional price.
"While we are not shutting down pumps like other private sector retail marketing companies, we are definitely slowing down on our expansion until the policy environment becomes more conducive," said Mukarji. "We are not going to open any new pumps till a decision in this regard is arrived at," he added.
Shell has acquired land and started work on setting up retail outlets at many places across India. Petrofed, the apex hydrocarbon industry society in the country, in its newspaper ad campaign in January said that the returns on investment Indian oil marketing companies get are one of the worst in the world.
"It's time for the government to evolve its policy. Countries like Malaysia and Pakistan are also giving subsidy to private players, If the Indian government wishes, it can also do so," a senior official working in the oil and gas sector said.
The Petroleum Ministry recently said that the decision by private sector oil retailer Reliance Industries to close its petrol stations over denial of subsidy on par with public sector retail companies could be a cause of concern.
