India’s fuel retail landscape is poised to change in the next 12-18 months when diesel prices will no longer be subsidised.
Petrol is already out of the ambit of controlled pricing and the bulk segment of diesel has been deregulated. The retail portion continues to be subsidised though marginal monthly price hikes are dramatically bridging the gap with global prices.
So as more private players enter the arena (in addition to Reliance and Essar), the Government-owned Bharat Petroleum Corporation (BPCL) is only too aware that it needs to pull out all stops to stay ahead in the race.
“It is in our genes to compete. We love competition and need to gear up to take on new rivals,” R.K. Singh, Chairman and Managing Director of BPCL, told
Yet, to make this a reality, the company first needs to strengthen critical infrastructure such as pipelines to keep costs in check. “If overheads are kept low, the ability to compete with our rivals will be high,” he says.
For instance, capacity at its Kochi Refinery is being expanded and the pipeline to Karur is now being extended to Bangalore. Likewise, the Kota network, for products from the Bina refinery, will be extended a further 300 km to Jobner in Rajasthan. Then there is an LPG pipeline from Kochi to Coimbatore. “We would like to optimise our distribution costs. Pipelines are safer and cost-effective,” Singh says.
The second initiative in a free-pricing environment relates to service standards at retail outlets and brand images which, along with a convenient location, will go a long way in attracting customers.
“If we focus on these two aspects of marketing, we will enhance the retail experience,” he adds. Singh reiterates that keeping costs in check coupled with a top-class retail feel will keep the company comfortably positioned in a deregulated market.
So long as crude stays in the $100/bbl (barrel) bandwidth, this scenario of private players entering the market will become a reality within a year. Global oil producers, according to the BPCL chief, are also not comfortable with $120/bbl levels. “Equally, nobody really wants to revisit the 2008 days when crude skyrocketed to $160/bbl only to plunge to $50 some months later,” an industry expert adds.