It has been over five months that the Central Government deregulated prices of diesel in India. However, the private companies did not do much to compete against the state-run fuel retailers. It is now that the biggest private player, Reliance Industries Limited, has slowly begun to expand its activities.
In October, 2014, the NDA Government took its first major step by deregulating the diesel prices. The government took this step to relax its burden over subsidies and on seeing the global scenario of decreasing crude prices. In 2010, the petrol prices were decontrolled. However, the private companies are only now focusing over expanding their business activities.
Unaffected State-run companies
The State-run, Indian Oil Corporation (IOC) feels no threat from the private players. It is untouched by their nominal presence. Besides, it has immense faith in its loyalty programs and other initiatives to survive in the competition.
From April, 2014, to January, 2015, 71 Thousand Metric Tons (TMT) of petrol was sold by Reliance Industries. It also sold 36 TMT of diesel. Compared to this, Essar sold a lot more. It sold 179.5 TMT of petrol and 209 TMT of diesel. There is a huge gap in the figures of private and state-run retailers. IOC sold 6,816 TMT of petrol and 23,170 TMT of diesel.
Reliance as a threat
As of now, the state-run companies have been dominating the fuel market. The deregulation opened avenues for private companies like Reliance Industries to sell the fuel directly to the customers. With its varied techniques and customer service, the company may attract a lot of customers. It is also good at making quick decisions, better execution and has access to products from its refinery.
One of the major reasons that the state-run retailers are not scared of the competition is, its biggest threat, Reliance Industries is moving at a slow pace.In 2006, Reliance Industries had taken over 14.3% of market share in high-speed diesel.
An executive of Reliance Industries said that the company was trying to be extra cautious and sure of where the crude will settle. It also wants to know how the government will manage things when the oil price may rise again.
Crude prices had set a record by reaching at $147 per barrel, in 2008. The then government offered subsidies to state-run companies which then sold fuel to customers at low rates. This had shaken the business of private companies. Reliance Industries has thus now decided to take each step with patience and deliberation.
In the beginning of this year, Reliance Industries had given an earnings presentation in which the company said that it wants to create a replica of its success of 2006. It will make use of technology and consumer schemes for this. With this, the company hinted that it will soon bounce back in business. Reliance Industries owns 1,400 stations. Out of these, it has already opened 230 outlets. The company also aims to reopen the others within a year.