State-owned oil marketers lose share to RIL, Essar, Shell
State-run oil marketing companies Indian Oil Corporation (IOC) Ltd, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) lost nearly 12 percentage points market share in the fuel retailing business to private firms such as Essar Oil, Reliance Industries and Shell India in 2016-17 according to three officials at the state-owned firms.
It was expected, the three added, and the companies are launching measures to not lose any more share and regain some lost ground.
“The sales volume growth suffered during fourth quarter, in the aftermath of demonetisation and growing competitive intensity, with IOC, BPCL and HPCL reporting a fall of 3.5%, 5.3% and 2.8% on year, respectively,” Nitin Tiwari, analyst at Antique broking, said in a report on June 5.
Tiwari said the drop in sales volumes was primarily due to lower diesel sales; sales of the fuel fell by 5% at IOC, 9% at BPCL and 7.4% at HPCL year-on-year versus an industry-wide sales decline of 4%, indicating loss of market share to private players.
Until last year, the three stateowned oil marketers together sold more than 95% of all petrol and diesel consumed in India. Private fuel retailers held a 4% market share until last May, which has now grown to 12%, as they have expanded their networks.
“It was bound to happen. Essar has added over 1000 retail outlets during the year. RIL started with 400 outlets and added over 900 outlets. However, larger impact on the market share came about after RIL launched a ₹1 discount (on diesel) in March. Even a few paise matters to the truckers and fleet operators. Thus RIL gained more market share. But such discounts do not look sustainable going forward,” one of the three officials cited in the first instance said on condition of anonymity.
The trend is likely to continue for another year before it tapers off, another of the three added on condition of anonymity.
Spokespersons at the stateowned oil firms, and RIL, Essar Oil and Shell India did not respond to emails seeking comment.
The third official cited in the first instance said on condition of anonymity that his company has already undertaken several measures to further its market share and beat competition, including providing travel benefits to truckers, automating retail outlets and strengthening customer loyalty programs.
The private firms were very aggressive in the last three to six months, R Rajamani, executive director, corporate treasury at BPCL, said in an analyst call, after the announcement of the company’s fourth-quarter results. BPCL would see “how the competition played out” and respond appropriately, he added.
While petrol prices were deregulated or linked to the market prices of the fuel in June 2010, diesel prices were linked only in October 2014, making the fuel retailing market attractive for RIL, Shell and Essar Oil.