India’s two largest fuel retailing companies, Reliance Industries and Essar Energy, aredrawing up new business plans and making efforts to attract more and more customers, giving tough competition to State-run rivals. They will be offering great discounts and benefits to customers.
Lack of Sustainability in the Past
In 2002, 15% of the fuel retail market was ruled over by private players like Reliance, Essar and Shell. However, they were unable to sustain because of subsidized sales offered by State-run oil firms. As a result, Reliance decided to quit this sector while Shell and Essar also scaled down drastically.
Revival and Pull Strategies of Private Fuel Retailers
After the diesel price deregulation in October last year, the competition in the retail fuel market has been growing intensely. Reliance Industries has already restarted 230 outlets and further plans tooperate 1,400 stations in all. Essar also runs 1,400 outlets and is aiming to increase their numbers as well.
Private companies are striving to capture a bigger share of the market. They are providing efficient services and trying to get the pumps owned and operated by dealersto turn into exclusive retailers. They are also offering attractive deals to fleet operators.
Petrol pump operators revealed that Essar gives a concession up to Rs. 2 per liter on petrol. Reliance offers a discount of Rs.5 on petrol worth Rs. 300 and Rs. 10 on diesel worthRs. 1,000.
Stance of Private Fuel Retailers
Essar said that they want to offer their customers choices. To attract more customers, they have many levers such as service, non-fuel retail, fuel-plus offering, and more. They are aiming to attain retail market share that is equivalent to their share of refining capacity. The company also feels that private sector firms are a small part in the retail market and that will not be changing much.
Meanwhile, Reliance informed investors that they are planning to start attractive consumer schemes to boost the volumes in a swift manner and reach their 2006 performance levels. The company promised that it will work on its technology and focus on customer value. It will also work towards providing the right quantity and quality of fuel at the right price.
Stance of State-Run Companies
The benefits and discounts offered by private companies is a cause for concern for State-run oil companies. Ravi Shinde, President of the Petrol Dealers Association in Mumbai,expressed his concern over losing customers if this were to continue as India is a very price-sensitive market.
On the other hand, senior executives at Indian Oil Corp (IOC), Bharat Petroleum Corporation and Hindustan Petroleum Corporation are confident that the strategies employed by private players will not affect them as they have made their services efficient.IOC accounts for 47% of business in this sector. The company said that automation of retail outlets leaves a better perception on customers. This increases sales and profits and benefits the dealer as well as the company in designing their day-to-day operations. He said that they are well-prepared for the rising competition after the private players reinitiate their business.