Unhappy Reliance petrol and diesel dealers

Vol 27, PW 9 (02 May 24) Midstream, Downstream, Renewables

With losses accumulating, petrol and diesel sellers from Reliance Jio-bp fuel retail outlets are an unhappy lot.

Reliance and BP operate 1730 petrol and diesel retail outlets across India, divided into Company Owned Company Operated (COCO), Company Owned Dealer Operated (CODO) and Dealer Owned Dealer Operated (DODO) outlets. Around 70% of these outlets follow the DODO model.

Reliance typically signs 30-year leases for CODOs and 20-year leases for DODOs. Many DODO leases will run out every year from 2024, and most will run out by 2026.

Some DODO dealers claim they will not renew their leases as they are making losses, which Reliance has not satisfactorily addressed. Of most concern are the relatively low commissions on petrol and diesel sales at Reliance fuel retail stations, reportedly the lowest in the industry.

Reliance pays DODO dealers Rs1.94/litre ($0.02) as diesel sales commission and Rs3.30/litre ($0.04) for petrol. By contrast, state-owned fuel retailers pay Rs2.25/litre ($0.03) for diesel and Rs3.50/litre ($0.04) for petrol to their DODO dealers.

Rosneft-affiliate Nayara Energy pays Rs2.50/litre ($0.03) for diesel and Rs3.60/litre ($0.04) for petrol to its DODO dealers. In addition, Nayara has several dealer incentive schemes.

Dealers say they have asked Reliance "several times" to raise commissions. "But Reliance tells us to increase sales and earn more," claims a source.

Another source of worry is the supply of 'hot' fuel at temperatures between 38 degrees to 40 degrees Celsius. Dealers say they lose between 180 litres and 200 litres from every 20,000 litre tanker truck of fuel from Reliance when this fuel cools to 29 degrees Celsius in the underground storage tanks.

Ideally, dealers want Reliance to supply fuel at 29 degrees, the same temperature at which it sells fuel to Hindustan Petroleum and other state-owned oil marketing companies. "HPCL receives fuel (at Jamnagar) at 29 degrees," says a dealer.

"HPCL refused to accept 'hot' fuel." Reliance-BP compensates dealers with a Temperature Variation Allowance (TVA).

"But this works out to just 40-50 litres for a 20,000-litre tanker truck," we hear. "We still end up losing money."

State-owned oil companies and Nayara supply fuel at 29 degrees, we hear.

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Dealers complain of penalties ranging from Rs10,000 ($125) to Rs50,000 ($625) for not following Reliance’s guidelines. Declining to comment on commissions, a Reliance-BP spokesperson said it monitors “business performance to ensure dealer profitability at all times.” He stresses that Reliance-BP operates loyalty programmes, and has ‘fuel efficiency diesel’ and ‘additives petrol’ as a result of which its outlets sell 2.5 times more fuel than the competition and “Jio-bp dealers earn a higher margin in absolute terms.” Reliance-BP added it is the only oil marketing company with a robust and scientific TVA methodology to minimise the impact of temperature variation between supply and retail points. “All temperature variation calculations are done at a uniform base of 15 degrees Celsius at the supply and delivery locations,” we hear. Reliance-BP insists its guidelines are "to ensure partners adopt safe practices for uniform delivery of superior services to customers.”

Unhappy Reliance petrol and diesel dealers

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