India’s state-run oil marketers such as Indian Oil, Bharat Petroleum and Hindustan Petroleum have adopted a simple mantra ? If you can’t raise prices, use technology to save costs.
The rush to automate retail operations is driving business for providers of these niche technologies such as Honeywell Automation India and AGS Transact Technologies. Specialised technologies aimed at oil marketers have also emerged as an attractive opportunity for foreign players that have limited scope for growing at home.
“Automation is fairly advanced in many developed countries, while India is still in the process of doing it. There would certainly be more opportunities for foreign tie-ups going forward,” said Arvind Mahajan, partner – energy and resources at KPMG India.
Automation means all operations at a petrol station from inventory management and delivery to receipts and fuel dispensers are computerised or machine-controlled, providing oil companies accurate sales data and a means to prevent adulteration. This also helps customer service.
Automation technology provider AGS Transact, which has recently attracted investment from private equity firms TPG and Actis, tied up with Germany’s Implico Group last week as it aims to capture a significant portion of business from India’s oil refiners and marketers.
The partnership aims to help oil companies to save costs by providing a software to track supply of fuel from terminals to retail outlets. Fuel is transported from bulk storage stations to petrol pumps mainly by trucks, and the software will identify areas where the companies can save transport costs.
“India has huge market potential, AGS will be our local partner and we’re hoping to win contracts from both large and small regional players,” said Michael Martens, managing partner, Implico.
AGS Transact’s SVP Satish Zope said the recently introduced cap in the number of subsidised cooking gas cylinders at 6 for every household per year will also create an opportunity for technology providers. Software can help oil companies track the delivery of LPG cylinders to every household.
AGS’ rival Honeywell Automation, an affiliate of US maker of thermostats and electronic controls Honeywell International, recently reported a 35% jump in net profit to R21.2 crore in the quarter ended September 2012 from Rs 15.7 crore a year ago period.
In recent years, oil marketers have been investing heavily in automating retail operations at their petrol pumps to improve customer services and prevent fuel adulteration. Experts say that eventually pricing of all petroleum products will be dynamic ? the slightest change in volatile oil prices immediately reflected in the prices of diesel, petrol, LPG and LNG. An eventuality for which oil companies need to be prepared.
IOC’s N Srikumar, executive director – marketing and branding, said the company is introducing retail automation and looking to improve technology at petrol pumps in a major way. IOC, the country’s biggest oil marketer, had retail automation at 2800 petrol stations at the end of March, and plans to add another 1700 outlets by the end of this fiscal year.
The company spends between R6 lakh to 8 lakh to automate each station. At the top end of the range, the company will spend R136 crore on retail automation this year.
IOC also plans to introduce automation at 60 of its 138 terminals by March 2013 and by 2015 the goal is to automate 50 more storage stations, taking the total to 110 automated terminals. The cost will be R10 crore per terminal, Srikumar said. BPCL and HPCL, too, have been focusing on automation to improve quality and quanity of services to their customers.