In a bid to pre-empt threats of poaching from new entrants in the retail oil marketing sector, Hindustan Petroleum Corporation (HPCL) has brought 340 retail outlets (ROs) under its direct control, thus turning 67 per cent of its ROs under 'company owned' category.
HP plans to increase company outlets further this year even though petroleum ministry has 'advised' oil marketing companies to refrain from poaching into others outlet.
With the acquisition of these ROs, HPCL now have 67 per cent of the total ROs under 'company control' category, where the site of the ROs are owned by company itself. HPCL had 4,729 retail outlets across the country at the end of 2001-2. It has 24 per cent market share in the motor fuel (MS and HSD) category.
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The company plans to continue with this strategy this year as well given the fact that dealer-owned networks are likely to be susceptible to new players.
"In a changing marketing scenario with the advent of new players, having control over marketing network is of paramount importance. We will continue to turn more and more dealer-owned-dealer-operated (DODO) outlets into company owned category," a company official said.
By this strategy, company either takes over the possession of the RO site by buying the place outright or it enters into long lease contract with the property owner. With this, the dealer loses control on the land, thereby losing freedom of switching to new oil marketing companies.
In popular parlance, the shift is from DODO to company-owned dealer-operated (CODO) or to company-owned company-operated (COCO) outlets. This also entails large investment on the part of petroleum companies to buy the site which ranges between 20,000 square meter to 200,000 square meter.
However, the petroleum ministry has believed to have advised old and new oil marketing companies to refrain from poaching into others territory. Still, the establish players are clearly not taking any chance and fortifying their holdings in CODO or COCO categories.
Many international players have set their eye on Indian market which is seen revival of demand off late. Four Indian companies have already received clearance from petroleum ministry to set up marketing network. They are Numaligarh Refineries (NRL), Reliance, Essar Oil and ONGC. While RIL has received permission to set up 5,849 outlets, Essar Oil has received for 1,700 and ONGC for 600 ROs and NRL for 510 outlets.