28/4/2015 0 Comments
NEW DELHI: More than five months after India deregulated diesel prices, private players have done little to challenge the hegemony of state-run fuel retailers as the main rival, Reliance Industries (RIL), which burnt its fingers in fuel retail last time, is cautiously expanding only now.
Diesel prices were deregulated in October 2014, the first major reform by the Narendra Modi government which came in the wake of falling global crude prices and a desire to slash the Centre's subsidy burden.
Petrol prices were decontrolled in 2010 but private retailers are only now getting back in the game, albeit gingerly, as diesel consumption is thrice that of petrol in the country.
"There are no alarm bells right now. Private players have a minuscule presence today and our existing initiatives and loyalty programmes will be able to meet any challenges emerging from them," said a spokesman for state-run Indian Oil Corp (IOC). The spokesman added, "In the past few years, we have invested heavily in branding, visual identity of our outlets, automation and skilling of our workforce to raise the customer service level. We aren't really scared about the private competition as yet."
A spokesman for Bharat Petroleum Corporation also said the competition from private players is still mild and therefore the state retailer hasn't been forced to think of any special measure to deal with it.
The fuel retailing business has mostly been a state monopoly in India, with state-run firms purchasing and selling fuel at rates fixed by the government. The recent deregulation is a second chance for private oil companies to sell petrol and diesel directly to retail consumers after trying out and succeeding for a short while in the previous decade.
Private players have the ability to pose a sudden challenge to the established firms owing to their quicker decision-making, immense project execution ability and access to product at their refineries.
At the moment, though, private players control barely 3,000 of the 53,000 retail outlets in India.
The biggest reason why it's business-as-usual for public sector firms is that RIL, which created waves last time - it captured 14.3% market share in high-speed diesel in 2006 - is going slow this time.
Between April 2014 and January this year, Reliance sold 71 thousand metric tonnes (TMT) of petrol and 36 TMT of diesel, compared to Essar's 179.5 TMT of petrol and 209 TMT of diesel. Shell sold about 143 TMT of petrol and 29.2 TMT of diesel.
These figures are dramatically lower than that of state-run firms due to lower reach and smaller time window for the private firms. IOC sold 6,816 TMT of petrol and 23,170 TMT of diesel in the same period.
"We have wanted to be more sure on where the crude settles and how the government deals with oil price, when it starts rising again," said a Reliance Industries executive on the company's cautious retail rollout, requesting not to be named. Aspiralling crude price, which reached a record $147 a barrel, and the government's decision to offer subsidy only to state-run fuel retailers to sell at a below-market rate threw private retailers out of business in 2008.
This time, RIL has chosen prudence over haste to avoid getting caught in the same trap. RIL and Shell did not officially comment for this story.
In an earnings presentation in January, however, RIL had said it wants to replicate the 2006 success leveraging technology and consumer schemes. Of the 1,400 filling stations it owns, 230 outlets have been reopened and the company aims to revive the entire network within a year, as per the presentation.
Essar now operates a little more than 1,400 filling stations. "While Essar Oil has about 10% refining market share in the country, its retail market share is much lower," a spokesman said, adding the company is in the process of adding 600 outlets and "reviewing its retail strategy to tap into the growing gasoline demand by additionally targeting city centres for new outlets."
Shell has 76 filling stations although it has a licence to operate 2,000.
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