The abrupt dismantling of the body will now put the four PSUs to enormous difficulty as they will not be allowed to select their own dealers. "This is happening at a time when the first phase of reforms has already kicked off in the petroleum sector and marketing therefore becomes the key to profitability," sources said.

In fact, due to this totally unexpected decision by the Centre, there is an enormous backlog of dealership applications dating back to 1995-96 which still need to be cleared. This now seems an insurmountable task and, with no clear guidelines on the matter, the oil PSUs could be in a fix till the elections are through and a new government is in place.

The(then) OSB was set up in the mid-eighties and prior to this, the oil companies had the freedom to select their own dealers. With the OSB, the appointment of the dealer was done by a retired judge of the high court along with two representatives from the oil companies -- one from the PSU selecting the dealer and the other from a counterpart. Hence, for an IOC dealership, the deciding people would be representatives from IOC and either BPCL/HPCL/IBP.

The system, undeniably, had its flaws as there were several variables that went into the appointment of a dealer. The first and most obvious were the pulls and pressures from various political corners which led to roping in candidates who simply were not fit for the job. The other, of course, was the reservation quota for various categories right from dealerships for war veterans to those slots based on caste.

"It is not as if the PSUs had any objections per se to such people taking over dealerships. The truth is that most of them find it very difficult tooperate their own working capital schedule," sources said. To elaborate, retail outlets on highways seldom go in for instant cash payment from truckers as these transactions are largely on credit. For a war veteran with limited cash on hand, coping with this business is almost impossible.

This explains why most oil companies have problems in being able to deliver the best to customers. "It is very easy for people to say that we still have our fossilised ways of operations but the truth is that in the retail trade, we work with one hand tied behind our back," PSU sources said. They reiterate that it would be as easy for any of the marketing companies -- IOC, HPCL BPCL or IBP -- to put up world outlets except that there are just no opportunities to do so.

For the moment, the doing way of the DSB is going to put a lot of pressure on these PSUs as their expansion plans for outlets will come to a standstill. Unless there is a move to allow them to recruit dealers directly, the process of coping with therigours of reforms will be a painful one.