MUMBAI: Faced with loss of income in its hydrocarbon business because of a slump oil prices and fuel demand, billionaire Mukesh Ambani-led Reliance Industries is seeking a 10% waiver on rent the company pays to its fuel retailers.
Reliance Industries Ltd (RIL) operates 1,400-odd fuel retail outlets. Of these nearly 500 are company-owned and dealer-operated wherein RIL has rented land from owners. It also has 30 aviation fuel stations across the country.
"Since RIL is bearing losses in its oil business, it has requested us for a 10% reduction in monthly rent for the next 10 months," said an RIL fuel dealer on the condition of anonymity. In addition to codo, RIL also has outlets which are dealer-owned, dealer-operated and company-owned, company-operated.
RIL did not reply to an email sent on 9 June.
In April, Brent crude prices fell to their lowest since 1999 as the global coronavirus outbreak and a subsequent lockdown hit oil demand.
Consequently, refiners suffered inventory losses and demand erosion. Last quarter, RIL incurred a one-time loss of ₹4,245 crore due to the pandemic-induced lockdown and inventory losses because of fluctuations in the global oil prices.
So, to cut costs, Ambani, RIL chairman, has decided to forgo his annual salary of ₹15 crore. In addition to Ambani, the company's top management, and a sizable section of employees in the hydrocarbons division of RIL have also taken pay cuts.
According to an internal memo to employees, RIL said the company was compelled to implement the austerity measures as its hydrocarbons business has been hit due to a sharp drop in demand caused by lockdowns across the world. Accordingly, employees with compensation in excess of ₹15 lakh per annum will have a 10% reduction in fixed pay and employees earning less than ₹15 lakh will have no reduction in compensation.
Oil prices and fuel demand have, however, been recovering. While the international benchmark Brent crude is currently trading at $40.44 per barrel and West Texas Intermediate (WTI) at $38.06 per barrel, consumption growth of petrol was higher at about 70% and diesel at 59% in May when compared with April.
The rent that RIL pays to its fuel dealers ranges from ₹1.7 lakh to ₹40,000 per month, depending on the land size it has rented. The company, said dealers, has also been increasing the rent by 5% every year except for this year.
"RIL has requested but I may not able to honour their request. Due to the lockdown, I have already suffered losses of around ₹2 lakh. In this case, the company should be supporting us instead of asking us to waive off rent," said another dealer on the condition of anonymity.
RIL's fuel retail outlets would soon sell fuel under the Jio-BP brand name. RIL along with its upstream partner BP Plc has entered into a joint venture wherein the former will transfer ownership of its existing fuel retail network and access to its aviation fuel business to the new joint venture.
The joint venture plans to expand fuel retailing network to 5,500 retail sites and 45 aviation fuel stations over the next five years.
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