Dealers demand government nod on multi-brand fuel outlets

Pump owners would earn a better margin, customers would have choice to buy their desired fuel; like they select other items in a super market

If the government and its oil marketing companies (OMCs) pay heed to the dealer demand, you may soon find multi-brand fuelling stations where customers would have the choice to go for their desired brand of diesel or petrol.

“We have already mooted the idea before the authorities and will soon sent a letter to the ministry in this regard. If this gets implemented, pump owners would earn a better margin, while customers would have choice to buy their desired fuel, like they select other items in a super market,” said Ajay Bansal, General Secretary of the Federation of All-India Petroleum Traders.

The current agreement between the dealers and says that if we are going for dealership of one of the state-owned companies, we would be allowed to sell only their products.

With speculations high on dealer-owned-dealer-operated (DODO) pumps shifting to private players in the decontrolled regime of diesel prices, the Federation of All India Petrol Traders has demanded selling of multi-brand products in Dodos, where they would be able to earn a better margin by going for products of state-run companies like IndianOil Corporation, Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum, and also private players like Reliance Industries and Essar Oil, all under one roof.

Out of the 42,000 pumps that come under the association almost 60% are DODO, close to 39-40% of the remaining come under company-owned-dealer-operated (Codo) ones. “Only a couple of 100 stations are company-owned-company-operated (Coco). Even if the dealers want to shift to private parties, their choice may be the codo model,” Bansal added.  

Currently, the dealers of private players have the option to go for dealership contracts with other companies too. Once, decontrol becomes completely in place, private players are expected to go aggressive on expansion mode, giving challenges to the public sector undertakings.

When asked about whether the company would go for Cocos in the decontrolled regime, an Essar Oil spokesperson said, “Our current model is based on Dodo model. Except one or two Cocos, the remaining 1400 stations that we have is on Dodo model.”

Recently, the petroleum ministry has barred state-run companies from investing in their own pumps. Through an order, the minisrtry asked retailers to set up pumps, only if the dealer is willing to bear the average cost of Rs 1-1.5 crore needed for a pump. According to experts, private sector owns more than 2500 fuelling stations in the retail sector.

A major concern for private players now is that they have to compete with PSUs, who enjoy the subsidy cushion from government and once decontrol happens, there will be a level-playing field for all.  Because of this, when oil prices shot up in 2008, RIL had to close down its pumps then.

The decontrolled regime may also see entry of private companies into the bulk sales category. Coupled with decontrol announcement, the government had announced dual pricing system for retail and bulk customers, which is threatening to wipe off the bulk revenue enjoyed by oil companies.