Discounts galore! RIL follows mini-Jio strategy in fuel-retail business

Its number of outlets might be lower than PSUs but the discounts ensure they can't relax

It is not only telecom where Reliance Industries (RIL) is keeping competitors on tenterhooks. The conglomerate is attempting something similar in its fuel-retailing business, forcing competitors to offer a tough fight to sustain market share. 

According to industry sources, RIL continues to offer a discount in the range of Rs 1 to Rs 1.4 to the market price. “There is no uniform discount. It is different at different pump locations, depending on the feasibility,” said one, who did not wish to be identified. Nevertheless, these are forcing competitors to match up in different ways. 

Though demonetisation offered public sector fuel retailers the advantage of accepting older notes for an extended period, the market volume growth numbers paint an altered picture. The industry growth rate for the retail sale of petrol was 9.4 per cent for the April 2016-February 2017 (this financial year’s first 11 months) period. Combined sales of the public sector oil marketing companies (OMCs) were, however, lower at 7.4 per cent. Retail sales of diesel paint a similar picture; the industry grew at a marginal 2.3 per cent, against a decline of 0.7 per cent seen for the public sector utilities.

“They are targeting all our customers but we are not seeing much impact now, due to (their) smaller number of outlets. Once they expand, it will be a challenge. 

A tough war for us,” said Ajay Bansal, president, All India Petroleum Dealers Association. 

He said the three government OMCs were also offering various schemes at different places. “Dealers too, for instance, are offering lucky draws and incentives for regular customers, to keep them with us. But, in the fuel retail business, there is not much scope for big discounts,” said Bansal.

An email query sent to RIL remained unanswered. 

What has so far held back a major market disruption is RIL’s smaller network, compared to the OMCs. According to the Petroleum Planning & Analysis Cell data, Indian Oil Corporation (IndianOil) has 25,627  outlets, Bharat Petroleum Corporation 13,619 and Hindustan Petroleum Corporation 13,978. 

RIL had 1,400 outlets, which it had shut; it has reopened 1,100 so far. Essar Oil, the only other private motor fuel retailer, has 3,300. “We have launched a number of schemes and putting up a fight. It is a free market. We definitely do not see a threat of market share moving to them; we are matching up through different schemes,” said a top marketing official, from one of the three OMCs.

Essar Oil wants to focus on maintaining market share, without losing sight of its margins. “Our focus is more on quality and services. We do not believe in market share through discounts. We were less than one per cent a year-and-a-half back and are now at three per cent, as we continue to expand our retail network,” said Lalit Gupta, managing director, Essar Oil. If the rival discounts continue, he added, they would decide whether to also do so.