New Delhi, May 22: Reliance Industries today raised diesel prices by Rs 2 per litre. It had hiked petrol prices on May 11. The decision comes at a time when public sector oil companies are awaiting the government’s signal to increase prices.

According to petroleum ministry sources, Reliance has a 4 per cent share in retail petrol sales and 9 per cent in diesel.

The company is also known to extend cash discounts to regular customers as a “loyalty bonus”.

Most of Reliance’s retail outlets are on the highways where diesel sales are higher compared to petrol, which sells mainly in the cities.

However, the filling stations of Reliance Industries have a higher presence in Gujarat and adjoining areas of Maharashtra since its refinery is located in Jamnagar.

It does not have a strong presence in other states and has been lobbying to gain access to depots of public sector oil companies, which have a product sharing arrangements among themselves.

The public sector oil companies, however, are not keen to let Reliance use their infrastructure, as it would only mean allowing a rival company eat into their market share.

Reliance’s move to raise prices is likely to strengthen the state-owned oil companies’ demand for higher prices, which has been held back due to political reasons.

Since the public sector oil companies have to compete with Reliance, especially in the western region, they are likely to benchmark their hike with that of the private company, as otherwise they would lose sales.

Similarly, Reliance will also have to keep the prices of public sector firms in mind, as it would lose customers if there is a significant difference.

Product differentiation is a strategy that companies adopt for maintaining different prices. However, this does not work beyond a point as all companies have branded petrol and diesel, which are positioned as premium products.

For instance, Indian Oil Corporation has a premium brand of higher 91-octane petrol called Xtrapremium and Xtramile diesel, Bharat Petroleum Corporation markets the Speed brand of petrol and diesel and Hindustan Petroleum sells the Power brand of petrol and Turbojet diesel.

These premium brands, which the companies claim give a higher mileage and better engine performance, are sold at rates that are a little over a rupee per litre than ordinary petrol and diesel.