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Government to Propose Easier Norms to Boost Foreign Investment in Indian Fuel Market

Government to Propose Easier Norms to Boost Foreign Investment in Indian Fuel Market

Foreign energy giants such as Saudi Aramco, Total and Trafigura could soon enter the Indian market with a major upcoming reform that the government is reportedly planning in fuel marketing.

Foreign energy giants such as Saudi Aramco, Total and Trafigura could soon enter the Indian market with a major upcoming reform that the government is reportedly planning in fuel marketing.

Reports citing sources close to the matter suggest that the oil ministry has readied a Cabinet proposal to scrap the pre-existent rule of restricting the license to market petrol, diesel and jet fuel to companies that have invested or intend to invest Rs 2,000 crore in exploration and production refining pipelines or terminals in the country.

The ministry is also consulting the finance, commerce and law ministries for the same proposal that has adopted the recommendations of the proposal prepared by an official panel that was consulted in March 2002 on a grant of transport fuel marketing license. The report was submitted by the end of May this year.

The aforementioned panel proposed scrapping the minimum investment limit by companies as a licensing condition while introducing minimum net worth bar for licence-seekers. Among other suggestions were opening up the sector to non-oil companies, imposing strict timelines for setting up petrol pumps, and penalties for not meeting the rollout plans.

In the current climate, the minimum investment-rule has been the biggest barrier for foreign players aiming to enter the Indian turf. In the year 2018-19, the demand for petrol, diesel and jet fuel has grown by 8 per cent, 3 per cent and 9 per cent respectively.

The change in these norms could also encourage supermarket chains to launch their own fuel pumps. While this could open a big revenue source for supermarkets, securing a safe space for setting up pumps in cities will grow to be a major challenge. In addition to this, the panel also wants companies to seek separate licenses for retail and bulk businesses. A company seeking fuel retailing license are to have a minimum net worth of Rs 250 crore. And if the same company wants a bulk marketing licence, it must have a net worth of at least Rs 500 crore.