A presentation on

Petro Retailing

PETRO RETAILING

THE PETROLEUM RETAILING INDUSTRY IN ASIA AND MIDDILE EAST FACES SIGNIFICANCE CHALLENGES .

WITH LOW PRODUCT DIFFERENTIATION, LACK OF CUSTOMER LOYALTY .COUPLED WITH INTENCE COMPETITION ,DUE TO DEREGULATION ,AS IN INDIA ,THE VARIOUS PLAYERS WILL TRY TO GAIN SHARE FORM EACH OTHER .

THIS WILL EXERT DOWNWARD PRESSURE ON MARGINS AND FORCE PLAYERS TO ADOPT NEW AND INNOVATION STRATEGIES

1882:Petro Retailing started in India with the supply of kerosene by

standard oil company.

1947:STANVAC (ESSO), Burmah Shell, Caltex & Indo Burma Petroleum Co.

were marketing petroleum products in the country at the time of independence.

1959:GOI setup the Indian Oil company(IOC), a govt company, for

marketing of petroleum products.

1970-78: Nationalization of MNCs

IBP, ESSO, Caltex & Burmah Shell were nationalized.The ESSO group operating in India became HPCL into which Caltex

was merged in it. Burmah Shell became Bharat Refineries Ltd.(BPCL)

Pricing of Petroleum Products

After the oil crises GOI appointed the oil price committee(OPC) under the chairmanship of S.Krishnaswami to look into the pricing of petroleum products.

The committee phasing out of the ‘import parity’ pricing & replacing it with Administered Pricing Mechanism (APM) for petroleum products.

Introduction of Loyality Programmes:

The NOC’s have introduced two types of loyality programs

1. For customer visiting petrol pumps2. For Fleet Owners

APM Came into existence in 1977.Further amended in 1986 APM insulated the exploration &

production companies, refineries & marketing companies from international price fluctuations.

APM broke down due to insufficient recovery under all the heads of pool accounts.

DISTRIBUTION OF PETROLEUM PRODUCTS GOI controlled the opening of new

retail outlets. Every year oil marketing companies

submitted a marketing plan This marketing plan was

subsequently to be approved by GOI. Also Dealer Selection Boards

selected the dealers for retail outlets.

1993The lubricants market was decontrolled of pricing &

marketing restriction with effect from NOV 1993.Major policy initiatives taken included : Decansalation of base oil Pricing Quantative Restriction Reduction in duties

1997In Nov 1997, the govt. announced a phased

dismantling of APM with full dismantling by April 2002.

1998-2002 (Phased Dismantling of Administered Pricing Mechanism)

1998 : Kerosene & domestic LPG were decontrolled.

2001 : ATF was decontrolled

2002 : Dismantling of APM

In year 2002

The petro retail business was deregulated in 2002 & the changes mentioned below were

Selection & Augmentation of Retail Dealerships Of Existing Player.

Marketing Rights to New Entrants. Investment Criteria Other Conditions

Retail Outlet Approval For New Players:Name of Company Number Of Retail Outlets

Oil &Natural Gas Corporation Ltd.

Numaligarh Refineries Ltd.

Reliance Industries Ltd.

Essar Oil Ltd. Manglore Refineries &

Petrochemicals Ltd. Shell India Pvt. Ltd.

1100

510

5849

1700

500

20000

2010: Fuel Price Changes

Effective June 26,2010

The Empowered Group of Ministers (EGoM)

decision to deregulated petrol & raise prices of diesel, kerosene & LPG is a step towards

recommendations mapped out by the Kirti Parikh Committee.E

KEY POINTS

Petrol prices deregulated; Diesel; LPG; kerosene

Shift to market driven prices While diesel would also be

deregulated over time, prices have been raised by 5%(Rs2/ltr)

Prices of cooking fuels

Post Deregulation Scenario• Entry of New Players• Retail Network Expansion• Perceptible Drop in the Average

Throughput per RO

RETAIL NETWORK EXPANSION

IOCL

BPCL

HPCL

RIL

EOL

NRL

SHELL

020

0040

0060

0080

00

1000

0

1200

0

1400

0

1600

0

1800

0

20072003

Throughput v/s financial year

1 2 3 4 50

20

40

60

80

100

120

140

160

180

200

throughput

throughput

Throughput per retail outlet

PRESENT STATUS

1. Subsidizing of fuel retail prices: GOI has been subsidizing the price of retail MS/HSD in

order to protect the Indian consumer from the volatility of international crude prices.

2 Continued Dominance of NOC’s: As result of indirect control of GOI over retail fuel

prices,the Petro Retail market continues to be dominated even after deregulation by the NOC’s

3 Evolution from commodity marketing to differentiation through brands:

Subsequent to deregulation all petro retailers have launched brand fuels.

Company wise retail outlets as on FY08-09

IOC BPCL HPCL RIL ESSAR0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Series1

Evolution from commodity marketing to differentiation through brands

COMPANY MS HSD

IOCL XTRAPREMIUM XTRAMILE

BPC SPEED 93, SPEED 97 HI SPEED DIESEL

HPC POWER TURBOJET

Continued......

4 Assured Quality & Quantity (Q & Q) of Products:

Some of the major efforts undertaken to assure Q & Q include

Retail Automation Market System Trucks fitted with tamper proof locks Delivery Vehicle

Customer Centric Forecourt Services• Courteous services • Efficient Fueling• Value Added Services

Introduction to loyalty programmes

Loyalty Programmes for Consumers:

Loyalty Programmes for Fleet operators:

EXTRA REWARDS

Rewards cash paying customers.

Co-BRANDED CARDS

• Maruti Auto Card• Indian Oil Citybank

Premium ATM/Debit Card

Launched for fleet owners & corporates.

Offers cashless purchase of fuel & lubricants

Provide flexible prepaid &

credit facilities It also covers vehicle

tracking & personal accident insurance covers.

IOC

BPC

Loyality Program for Consumers:

Loyality Program for Fleet operators:

PETROBONUS

Offers convinience & security for payments of fuel .

Also provides opportunity to collect valueable rewards & exclusive benefits.

SMARTFLEET

Offer s cashless transaction,

Vechile tracking,credit option & cash management system.

HPC

Loyality Programs for Consumers:

Club HP Smart 1 Card It is an electronic

card cum loyalty card . HPCL-ICICI Bank Co-

Branded Debit Card Entitles the

customers a waiver of surcharge for the fuel transactions.

HP Drive Track- It is an prepaid debit card with electronic payments.

It ensures effective management & control of fleet, remote loading of funds,vehicle tracking.

REFERENCES

www.infraline.com www.google.com www.wikipedia.com www.mopng.org

THANK YOU…