DUBAI - Essar Oil, part of India's Essar Group, has announced the opening of its first retail outlet at Ratnagiri in Maharashra. The franchisee-run outlet is the first such retail oil outlet to be set up in the private sector after the oil sector was deregulated.

Essar Oil had received licence to set up petrol pumps last year. The company plans to set up about 2,000 such retail outlets mainly in the South and Central India by 2006. It company has a target to set up 50 outlets by March this year. Raj K. Varma, chief executive officer, marketing Essar Oil said: "All these new outlets will be franchisee-run. The retail outlets will be under Essar label but products may be branded."

With financial institutions approving its debt restructuring proposals recently, the Essar group company is going full steam ahead with its retail strategy. Initially the retail operations will be conducted with imported finished fuels.

In two years' time Essar expects to market fuels including diesel, petrol, liquid petroleum gas and various fuel oils refined at its 240,000 barrels per day refinery being set up at Vadinar, Jamnagr in Gujarat.

The first phase of the project will be ready by mid 2005.

Speaking to Khaleej Times, Jagdesh M. Mehta, managing director and CEO of Essar Oil said: "We are starting our retail operations with imported fuel. With our own refinery scheduled to go on stream in mid-2005, we will be producing enough fuel to cope with our retail expansion."

Essar Oil plans to price its products marginally lower than that of the public sector oil companies.

"We have worked out a competitive pricing strategy to attract both retail and wholesale customers. In the retail sector, our products will be aggressively priced through rigorous cost management," he added.

As far as the bulk customers such as Indian Railways, State Transport Undertakings and various industrial establishments are concerned, the company is all set to make competitive biddings for fuel supply in direct competition with the public sector oil companies.

"We already have had some success in some of our bids to supply fuel to the State Transport undertakings in Maharashtra and Karnataka. In the future we will be making aggressive bids," said Varma.

Essar Oil belongs to the Essar Group which has an asset base of $3.6 billion and has business interests ranging from oil, steel, shipping, power generation, telecom and construction. In the oil business, it is involved in exploration and production, refining, marketing and pipelines.