Reliance Industries has slashed the price of fuel to snatch back market share lost to state pumps in the days after demonetisation, when the latter accepted old notes for some time and currently offer a discount on digital purchases.
Filling stations run by Reliance Industries have begun offering diesel to customers at 1 discount to the price offered by pumps run by state companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum.
“That (Reliance’s price discount) could have happened because of the incentive scheme provided by the PSUs,” Indian Oil Chairman B Ashok said. “Market-to-market, we would respond, if it is going to induce a fresh set of competitive pressure. Each market has its own tendencies, so we will respond accordingly.”
State-run pumps are already feeling the heat in a little more than a week since Reliance’s diesel price discount began. “Reliance pumps have significantly gained share in the specific markets they operate in,” said Nitin Goyal, treasurer at All India Petroleum Dealers Association (AIPDA), a body of state pump dealers. At a meeting slated for January 7 in Bengaluru, the association will discuss, among other things, ways to neutralise Reliance’s move, Goyal said.
To be sure, Reliance operates just 1,100 filling stations, mostly in Gujarat and some in southern states. But in the business of fuel sales, the slightest discount per litre can effectively wean away customers from a rival pump as the overall gains can be significant due to big volume play. Diesel sales are about three times that of petrol in the country.
Reliance Industries declined comment.
After the government banned old 500 and 1,000 notes in November, state-run pumps were allowed to accept the demonetised notes for fuel purchases for several days, drawing customers away from private pumps that couldn’t accept banned notes.
The government also directed state pumps to offer 0.75% discount on fuel purchases, making diesel cheaper by about 40 paise.
“But this comes as cashback after a few days. Reliance’s discount is bigger and upfront, making it more attractive for customers. Second, Reliance allows customers to use cash to load their prepaid cards while we have been instructed to allow only digital means. This again offers Reliance customers an advantage,” said Goyal of AIPDA.
A staff at a Reliance-run pump said it imposed no ceiling on discounts, while state pumps offered a digital discount on a maximum purchase of 2,000 for a customer each time.
A decade back, Reliance had grabbed about 14% in diesel sales in just a few years, using a mix of quality fuel, convenience, better service and loyalty programme. It had shuttered fuel retailing after oil spike brought back government price control.
This time though Reliance has been slow to expand. Ron Parker Authentic JerseyShare This