In an interview with FE's Saurabh Kumar, Hindustan Petroleum Corp chairman and managing director MK Surana, tells the future roadmap to move towards a less-cash economy, effect of output cut by the Organization of the Petroleum Exporting Countries and expectations from the Union Budget. Excerpts:
Oil marketing companies through their retail outlets took various steps to promote digital payments — from improving digital payment infrastructure to giving cash discount for digital payments — when the government on November 8 declared R500 and R1,000 notes invalid. Though for a brief while, earlier this week, there was a storm as to who will bear the cost of card transactions at fuel outlets, the government stepped in to soothe nerves. In an interview with FE’s Saurabh Kumar, Hindustan Petroleum Corp chairman and managing director MK Surana, tells the future roadmap to move towards a less-cash economy, effect of output cut by the Organization of the Petroleum Exporting Countries (OPEC) and expectations from the Union Budget. Excerpts:
How has been the effect of demonetisation on the company?
After the declaration of demonetisation, when the push came for less-cash economy, the oil industry pitched in many ways. Initially when there was issue of cash disbursement from ATMs (automated teller machines), fuel outlets disbursed R2,000 through PoS (point-of-sale) machines which eased out the stress on public. Subsequently, we pursued aggressively to provide facilities to accept digital payments such as PoS machines , e-wallets etc at various outlets. Today most of our outlets have infrastructure to accept digital payments and balance are also gearing up. This provides a good base to propagate cashless transactions. Earlier cashless transactions were in the range of 8-10%, but today it has reached more than 30%. This means that across the industry transactions worth R450-R600 crore per day are happening through digital mode which in turn means that much less cash is to be handled. It brings more transparency, convenience and control in the overall system. At fuel outlets, it also aids to the security aspect as less cash has to be handled . PSU Oil marketing companies also gave an incentive of 0.75% of transaction value on payments made through cashless means like debit/ credit cards , e-wallets etc for buying diesel and petrol at retail outlets . On 1st January , 2017 we also announced Rs 5 discount on online payment for LPG (liquefied petroleum gas) cylinders. The idea is to get people move to digital payments systems . Once they start realising the convenience then the ecosystem will work on its own.
How long will the incentives continue and will there be more such steps?
The oil industry operates at a very thin margin and so further incentives may be bit difficult. The incentives were required to create a cashless ecosystem. There are two ways to look at it—either we look incentives as a method to normalise the system or we look at it as the incentive to induce people to come out of their fears and inhibitions. Incentives are given to change the behaviour and also make people at ease with digital payments. Once they try, I am sure they will realise the convenience and the benefits. So, while in the corollary incentives will help in normalising the system also but the main objective is to move people towards digital payment system on permanent basis. It also needs bit of education and awareness and therefore PSU oil marketing companies have conducted many camps at our retail outlets to spread awareness about use and convenience of digital payments among general public.
What are your expectations from the budget?
Infrastructure tax concessions for refinery projects is one thing we are looking for as there are many projects in the pipeline and refinery projects need high investments and have long gestation. Clarity on GST for petroleum products is also another thing.
There were some pilots with composite cylinders. What is the status?
We will soon be rolling it out. Some trial quantity of cylinders are received. We are awaiting some approvals. We can roll out as soon as the same are received. Here too we need to remove mental barriers to accept it. People may think these are not as strong as steel cylinders though these are much safer. Some may think that composite cylinders have less LPG in it just because these cylinders are light in weight.
The OPEC is gearing up to cut production. How much will that impact Indian consumers?
The OPEC cut has to be supported by non-OPEC countries too to have a substantial impact. There definitely will be some movement in the international prices but it is unlikely to go to earlier levels of $100 per barrel. We expect crude oil prices to hover in the range of $55 to $65 in near future.