More choice for Indian motorists
The battle for a slice of the R7.5 lakh crore Indian petroleum retail market has hotted up with the go-ahead to the $226-billion-worth, UK-based BP Plc to set up 3,500 petroleum retail outlets in the country, according to a report in The Economic Times. It has also been granted approval to market aviation turbine fuel (ATF) in the country. The three state-owned oil marketing companies (OMCs)—IndianOil Corp, Hindustan Petroleum and Bharat Petroleum—account for 52,604 (93.6%) of the 56,190 retail outlets as of April 2016. The interest to set up private petroleum retail outlets has risen ever since the government freed petrol pricing in 2010 and diesel (2014). Earlier, private retailers like Reliance and Essar could not match the susbsidised prices offered by state-owned outlets, and shut pumps. BP is only the second international player after Shell, which has around 44 outlets, looking for a play in the country’s petroleum retail market. Once the BP outlets are operational, the Indian motorist can choose between 10 petroleum retailing companies. This includes the three state-owned OMCs, Reliance, Essar, ONGC, Numaligarh Refineries, MRPL, Haldia Petrochemicals and BP. However, barring the OMCs, Reliance and Essar, the presence of the others is quite negligible. It remains to be seen whether BP can change that situation.
The marketing rights for transportation fuel are given to firms investing or proposing to invest R2,000 crore in exploration & production, refining, pipelines or terminals in the country. In 2011, BP acquired a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India and also formed a 50:50 joint venture for sourcing and marketing gas in India. But, one problem area is the shortage of real estate in the major cities to set up retail outlets. However, that can be partially surmounted by setting up outlets on the national highways and in satellite townships adjoining major cities like Greater Noida and Navi Mumbai. In many cases the fuel sales at such outlets is higher primarily due to the higher demand for diesel. Currently, diesel accounts for 40% and petrol for 11% of the petroleum products sold in the country. While it is too early to say how big a dent companies like BP will make, there can be little doubt it will shake up industry standards in the same manner that Reliance’s entry did years ago.