According to officials at oil marketing firms, full impact of diesel price deregulation introduced in October 2014 will be seen this fiscal year. State-owned oil companies will spend Rs. 25 billion to open close to 3,100 fuel stations this financial year as rivals from the private sector step on the gas, multiple company officials said. According to officials at oil marketing companies (OMCs), the full impact of diesel price deregulation, which was introduced in October 2014, will be seen this fiscal year, and they have already introduced measures to take on competition. India’s three OMCs—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—together sell over 95% of all petrol and diesel consumed in India.
Historically, diesel was sold at subsidised prices in India, with the government compensating the OMCs later. Private fuel marketers received no such subsidy, and were edged out of the market. However, with subsidies now phased out, companies such as Reliance Industries Ltd (RIL) and Essar Oil are finding the market attractive. Cheaper crude oil, stable fuel prices and rise in fuel demand also have sparked optimism.
India’s fuel demand jumped 11% in 2015-16, the fastest in two decades, according to data from the Petroleum Planning and Analysis Cell. Demand for diesel, which accounts for roughly 40% of India’s total oil products demand, rose 15.12% over the previous year to a record high of 6.78 million metric tons (mmt). Petrol consumption was up 14.5% to 21.8 mmt. “Budget 2016 has given a big impetus to infrastructure spending. This will further fuel demand and give a huge fillip to transportation. We see this change in demand after a long time and this will push growth for oil companies,” an RIL official said on condition of anonymity.
RIL has already re-opened 90% or 405 of its existing 450 outlets in Gujarat. As of December 2015, it had 750 out of its total 1400. retail outlets open. Till last April, RIL had over 320 operational fuel outlets. The company, which had around 14% market share in fuel retailing in 2005-06, closed its outlets in 2008 as crude oil at $150 a barrel and lack of subsidies made the business unviable. Since then, it has built a 3.5% market share. “Sales at our outlets are robust now after RIL introduced Rs.1 discount on both petrol and diesel this February. Volumes have begun picking up,” said Sunil Golwala, an RIL fuel retailer from Rajkot, Gujarat. An RIL spokesperson declined to comment.
Essar Oil which has 1,500 fuel outlets and is building another 1,400, is planning 2,100 more, which will take its tally to 5,000. This will make it the largest private fuel retailer in India. Essar Oil did not reply to an email. “We are expecting that as all RIL fuel retail stations will be operational this year and Essar Oil too expands, there is a need for us to expand as well. We have introduced automation, better customer interface and a transparent mechanism in place in terms of billing. Though the market will get tough, it won’t be easy for RIL or Essar to win customers,” said a BPCL official, requesting anonymity.
BPCL plans to open around 800 outlets this fiscal year at a cost of Rs.6-7 billion. It opened 630 outlets last year. It has automated 8,000 of its 13,000 odd retail outlets so far. This includes providing printed bills and transaction details. HPCL, the second largest fuel retailer which opened 590 outlets last year, plans to open 800 outlets this fiscal year at Rs.9 billion. “We have a 26% market share in the fuel retailing segment. But with the measures that we are putting in place, we would continue to grow,” said an HPCL official, who did not wish to be identified.
HPCL dealers will shortlist top 20-30 customers and visit them regularly to maintain relationships. Around 15% of HPCL’s business comes from the loyalty programmes. “We are positive on our non-fuel revenue segment. We have tied up with 30 banks to have 1700 automated teller machines across our retail outlets. This is the highest among all oil marketing companies, an HPCL official said.
IOCL, India’s largest fuel retailer, will open around 1,500 fuel retail outlets this fiscal year against around 1,100 last fiscal. “Only 20% of the 1,500 outlets would be in metro areas. We see more growth on the highways and rural areas,” said Indrajit Bose, executive director, branding and communications IOCL.Share This