IOC to up marketing spend to Rs 1,800 cr

Indian Oil Corporation (IOC) will scale up its investment in marketing activities this financial year to Rs 1,800 crore from last year's Rs 1,225 crore.

The company will also invest Rs 300 crore for developing a 600,000 tonne a year liquefied petroleum gas (LPG) station in Ennoor near Chennai. However, no clear timeframe has been set for the completion of this project.

IOC will increase its investment in the retail segment from Rs 534 crore last year to Rs 624 crore in 07-08. The investment in the LPG segment that includes equipment procurement, auto LPG, three new bottling plants in Mathura, Raipur and Baroda, would move up from Rs 423 crore to Rs 629 crore. Investment in aviation fuel business would also increase from Rs 24 crore to Rs 60 crore, while infrastructure and tankage investments would go down to Rs 180 crore this year from Rs 183 crore in 06-07. An additional Rs 300 crore would be invested in developing small pipeline projects, upgradation of quality control laboratories and modernisation of lube plants, said G C Daga, director, marketing, IOC.

"We are increasingly focusing on reaching out to the rural markets in India through our Kisan Seva Kendras(KSKs). This year, we have planned 1,600 new retail outlets all over the country of which 1,000 would be KSKs alone. At present, we have 12,954 outlets, including 1,330 KSKs," Daga said.

The reason behind the proliferation of no-frills, low investment fuel stations in rural areas, which mostly sell diesel at market rates, is the increase in the number of pumps in the city, which has dented the throughput for individual oil companies, Daga said.

The cost of setting up these pumps vary between Rs 7 lakh and Rs 8 lakh a pump. In 2006-07, KSKs contributed 3 per cent to the total sales of the 19 million tonne of high speed diesel for IOC. This year, the company expects this share to increase to five per cent. Daga added that the increase in the rural road network would translate into more business opportunity for the company. To take first mover advantage, IOC is being proactive in widening its pump network in these areas.

The switchover in rural centres from diesel, petrol and LPG as fuel to piped natural gas and compressed natural gas is also compelling oil companies to make inroads into the rural markets, which were hitherto, not the center of focus for such companies. IOC has undertaken a retail automation programme that would cost the company Rs 320 crore to cover 2,000 outlets this year. The company plans to automate all retail outlets selling more than 200 kilolitre of fuel per month in a phased manner.

The company has also signed a memorandum of understanding with Nepal Oil Corporation for the transportation of fuel through a 38 km pipeline. IOC has entered into a marketing agreement for the next five years to take care of the entire fuel requirement of NOC.