In the face of this competition, India's public sector oil companies - Bharat Petroleum Corporation Limited, Indian Oil Corporation, IBP and Hindustan Petroleum Corporation Limited - are expanding their retail networks.

Over 3,000 retail outlets from the four companies will be set up this year. Moreover, industry sources believe that the four public sector companies may form a cartel to face any threat from the private sector.

Indian Oil Corp chairman M. S. Ramchandran has predicted that when the Indian government finally withdraws price controls totally, a price was is possible. IBP managing director Arun Jyoti believes that the war has already begun but believes that his company has what it takes to face it.

"After the oil sector deregulation, the price war has started in several product segments. So, if such a war is extended to petroleum and diesel we are ready to face it," said Jyoti.