DNA Money Edit: Do we need 86,000 more fuel outlets?

While oil marketing companies – both government and private – are looking to add over 86,000 new fuel retail pumps over the next decade to the already existing over 64,600, questions are already being raised over the economic viability of the move. Studies now indicate there is room for only 30,000 additional fuel pumps if the current throughput levels are to be maintained.

The decision is also not in sync with the government's efforts to move towards electric vehicle mobility and other alternative fuels, which is intensely being pushed by the central government to combat increasing global warming.

Before giving go-ahead for the expansion, the government should have taken cues from the mature economies like the US, which has around 1,50,000 petrol pumps, a sharp decline from around 2,02,800 pumps it had in 1994. Stagnating fuel demand and deteriorating pump economics led to the closure or consolidation of pumps. This has translated into higher throughput per outlet. With an increasing preference for alternate fuels and stagnating fuel demand, the number of outlets could reduce further. In comparison, India's throughput from 64,624 fuel retail outlets is less than half of the US.

The fuel outlet expansion plan thus sends out a confusing signal to the vehicle industry stakeholders. The government should instead encourage setting up of more fuel stations providing alternative fuels, which is the future. Further, incentives should be given for setting up of alternative fuel stations vis-a-vis conventional ones, which will help in building the required infrastructure for clean mobility.