The Hindu Business Line : To beat competition, PSU oil retailers double outlets

THE public sector oil retailers have undertaken an unprecedented expansion in their business this year. This fiscal, they have more than doubled the number of retail outlets set up last year to sell petrol and diesel.

The prime driver for this `frenzy' is the need to acquire retail outlets at strategic places, ahead of the competition offered by private sector retailers. Private players Reliance, Essar and multinational energy major Royal Dutch/Shell were allowed to set up retail outlets last year. While Reliance has announced that it would be setting up around 300 outlets in a few months' time, the other companies are pursuing their retail operations at a lower intensity.

Up to December-end 2003, the public sector oil marketing companies set up 1,950 outlets against 960 outlets during the previous fiscal 2002-03. In the case of Indian Oil Corporation (IOC), the company is expecting to set up 1,000 retail outlets during fiscal 2003-04 against 165 during fiscal 2002-03. The increased commissioning of new outlets has been accompanied with a drop in volumes sold per retail outlet. In fiscal 2003-04, the average throughput per outlet is around 220 kilolitre per month per retail outlet against 190 kilolitre in the previous year.

According to Hindustan Petroleum Corporation Ltd's (HPCL) Director (Marketing), Mr N.K. Puri, the increased commissioning is also due to the fact that the dealership selection boards (DSB) have been scrapped. The DSB was a Government-constituted mechanism for appointment of dealers and was dogged with delays in its working. It was operational until last year when a scam relating to the allotment of retail outlets was unearthed by the media.

"In view of the ensuing competition from the private sector, the public sector companies are out to capture sites that are natural locations for fuel demand. This is a transition phase and the frenzy would continue some time till a shake out happens. The flip side of the frenzy is that the throughput per pump has been dropping over the last few years since the demand has not been growing at the same pace as the commissioning of retail outlets," said Mr Puri.

Responding to questions on IOC's impressive growth in the marketing business, IOC's Director (Marketing), Mr N.G. Kannan said, "We are gearing up for competition. Although the throughput per pump has come down, it is a transitional phenomenon given that automobile sales are growing at a healthy 34 per cent. Also, the economy is growing at a robust rate and we are putting in place schemes to woo bulk consumers."

One of the most important customer category is truck fleets which consume a significant quantity of diesel, a mass consumption fuel accounting for 40 per cent of the petroleum products consumed in the country. Bharat Petroleum Corporation Ltd (BPCL) has a scheme called Ghar. Under this scheme, truck crews can utilise BPCL's infrastructure along the highways to fuel, rest and undertake minor repairs using a credit card supplied by BPCL to the truck operator. This way, the truck crew need not carry cash through the journey. IOC is putting together a similar scheme, `Xtra power card.'

IOC is also looking at cornering a significant consumer base along the Golden Quadrilateral, which consists of upcoming wide roads criss-crossing the country.

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To beat competition, PSU oil retailers double outlets