The petrol retail sector can be termed as one of the most organized sectors of the retail industry. In line with the strong GDP growth, the petroleum sector saw a significant increase in the consumption of petroleum products during 2006-07, with the year on year growth touching a level of 5.9% which has resulted in sales of petroleum products growing from 113.21 million metric tones (MMT) in 2005-06 to 119.85 MMT in 2006-07. The average growth in the consumption of petroleum products over the last five years is at a level of 3.4%.
The oil and gas industry is estimated at US$ 110 billion, which is 14% of India’s GDP. This sector is about 45 per cent of the total energy consumption of the country, which is the fifth largest energy consumer in the world. Petroleum exports have also emerged as the single largest foreign exchange earner, accounting for 11 per cent and 15 per cent of the total exports in 2005-06 and 2006-07 and growing at the rate of 67 per cent and 58 per cent respectively. The growth continues in the new fiscal with the export of petroleum products touching US$ 19.7 billion during April-December 2007.
Key play8ers in this sector include Bharat Petroleum Corporation Limited (BPCGL), Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation (IOC) and Oil & Natural Gas Commission Limited (ONGC).’ The three government owned companies – Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) – are together planning to open over 3,000 retail outlets this financial year, as against 2,000 outlets opened last year. In fact, over 1,600 outlets have already been commissioned in 2008.Oil retailers are also looking at revenues from non-fuel retailing, such as FMCG products and grocery sales, at their outlets. Another public sector company, Mangalore Refinery and petrochemicals (MRPL) is planning to open around 15 outlets over the next two months. Numaligarh Refinery (NRL), a subsidiary of BPCL, has 74 retail outlets across the country and plans to open at least 100 more in 2008, both in the North East and north India.
The country has 36,936 petrol pumps. Of the total retail outlets, state run Indian Oil, Bharat Petroleum and Hindustan Petroleum own 34,304 pumps while the remaining belong to the private sector.
The PSU giants have been tying up with various FMCG and other companies to promote forecourt retail. With the rapid growth being witnessed in the fast food industry, BPCL has entered into agreements with both of the Joint venture partners of McDonalds operating in India – Hardcastle restaurants Private Limited and Connaught Plaza Restaurants Private limited. Subsequent to the agreement, three retail outlet sits wee signed up in Bangalore Territory for setting up McDonalds restaurants. During the year, BPCL also signed an agreement with Nirulas Corner House Private Limited for setting up Nirulas restaurants in the network. These QSR alliances, while enhancing the image of the retail network, will serve as a differentiating customer value proposition. BPCL also operates the In & Out convenience stores at various petrol pumps.
Following in the footsteps of global oil marketing companies, Indian Oil has decided to enter the retrial business at some 2,000 of its 16,455 retail outlets. Indian Oil is planning to partner with existing retailers, such as Apollo for pharmacies, Subhiksha, bookseller Crossword and Café Coffee Day. This is similar in concept to the ‘In & Out’ retail store format at competitor Bharat Petroleum Corp Ltd., which has formed strategic alliances with major brand owners, retailers and music stores Planet M and Music World, among others. Indian Oil expects the retail business to contribute a total turnover of around Rs 3,000 crore when rolled out fully.
Globally, petrol pump-based convenience stores have developed into larges businesses with companies such as Roy8al Dutch Shell Pic., Caltex Australia Petroleum Pty Ltd and BP. The growth in highway infrastructure courtesy the Golden Quadrilateral project and the impending competition in oil retailing, seem to be the two main drivers. Moreover, with land becoming costlier, there is limited scope for urban growth. Little wonder then that nearly 70% of all new outlets are coming up on highways.
Among the private sector players, Reliance Industries outlets were selling almost four times the average sales of PSU outlets until May 2006. The sales volumes of RIL, outlets fell significantly after PSU oil retailers were prevented by the government from raising prices. Its market share, which stood at 14% has dropped to less than 1% after a large price differentiated with PSUs opened up. Over 50 lakh regular customers, who had been patronizing RIL, outlets close to switch to other outlets.