April 05, 2009

Why should oil cos promote subsidized fuel?

I was wondering why oil companies should advertise for their products that they sell on a price less than what they invest to produce it.

India’s petrol and diesel is ‘famously’ subsidized or at least that is what the government says. But see this offer by Indian Oil

It has introduced ‘Car-in-a-tank’, an on-ground campaign at all IndianOil/IBP/AOD petrol/diesel stations (retail outlets) selling XTRAPREMIUM and/or XTRAMILE and/or Autogas and is valid from 1st February to 30th April 2009.

A customer has to do this

Purchase XTRAPREMIUM or XTRAMILE or Autogas, worth Rs 300/-
SMS ‘IOC Bill No.’ (Bill of purchase of XP/XM/Autogas) to 53636
Winners to be selected through a system-based random process

And the prizes are:

Maruti Suzuki SX4 - 01 Nos.
Maruti Suzuki A-Star – 04 Nos.
Maruti Suzuki M 800 Duo - 08 Nos.
iPod or equivalent – 500 Nos.
XP/XM/Autogas Rs 500 gift voucher – 1000 Nos

India is the world's fifth-largest consumer of energy with domestic crude production holding at just under 0.7m barrels a day. At a time when Rupee is depreciating, can the country afford to have an additional 9 to 10 per cent import bill on the crude alone?

Why should the oil companies promote their products at a cost to the government and in turn to the tax payers?

And now with Monopolies and Restrictive Trade Practices Commission (MRTPC) asking oil companies to clarify the quantitive difference between normal fuel and branded fuel, the scene has become murkier.

And complaints against Indian Oil and other companies in consumer forums have been on the increase. You can read some of them here and here

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