Essar packs a Punch in branded petrol

Essar Oil, the private oil company, is throwing down the gauntlet in the premium petrol market.

It is launching a premium brand petrol by the name 'Punch' next month at a price that is Rs 1.25-1.30 lower than the price charged by the three public sector oil companies "" Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL).

Indian Oil sells premium petrol and diesel under the 'Xtra Premium' and 'Xtramile' brands, respectively. HPCL hawks a premium motor spirit called 'Power' and diesel with additives called 'Turbo Jet'.

BPCL sells only premium petrol called 'Speed'. The three charge between Rs 42 and Rs 42.30 in Mumbai for premium petrol, some Rs 1.32 per litre more than what they charge for their regular petrol.

Essar Oil, in fact, will no longer sell plain petrol, but intends to replace it with Punch. "Henceforth, the company will promote only quality or premium fuels at its retail outlets. Punch, the premium motor spirit, will be introduced as a high performance fuel with multi-functional additives at no extra cost," a company source said.

He added, "While Essar Oil has plans to launch the premium fuel, the timing and details of the launch are yet to be finalised. Hence, we are at present unable to comment on the matter."

But it's a moot point whether Essar Oil's initiative will spark off a nationwide price war in the premium petroleum products market. With just 40 petrol bunks in Maharashtra and Goa, Essar Oil is still a pygmy.

In contrast, the state-owned oil companies have some 20,000 retail outlets in the country. Essar is, however, planning to scale up the number of its petrol pumps to 500 by the end of this financial year, and to 2,000 over a period of three years.

Also, as a senior BPCL executive points out, premium fuels are usually in demand in urban areas. Essar Oil doesn't have a major presence as yet in the big cities.

Some oil company executives are, therefore, dismissive of Essar Oil and maintain that they will not cut prices. A senior IOC official said, "Essar or any other company cannot match our premium fuels. We have 91-octane petrol which cannot be compared with any other petrol. Besides, we will definitely not lower our product prices."

But the BPCL executive pointed out, "Wherever Essar sells, we will see what the response is and accordingly, take a decision."

He added that the public sector oil companies had matched the prices of Essar's products wherever they were available. "If we can't beat them, join them," he said.

However, in the vicinity of its petrol pumps in the western region, Essar Oil could offer stiff competition to the state-owned oil companies. It is banking on the long-distance traveller who will not mind travelling the extra mile to fill his tank.

In the US, vehicle owners are known to travel a bit extra to petrol stations that offer lower prices.

In Europe, car owners in border areas used to cross into neighbouring countries to buy cheap fuel. Those living on the US-Canadian border continue to do so even today.