Downstream firms high on branded fuel demand

The demand for branded fuel is rising sharply. The increase in average daily volume sales of branded petrol was 41 per cent between 2005-06 and 2006-07. For diesel, the figure was around 55 per cent, according to data provided by Indian Oil Corporation (IOC).

This is much higher than the growth in overall sales of petrol (7 per cent) and diesel (about 8 per cent.). Branded fuel, however, still accounts for a small percentage (low single digits) of overall fuel sales in the country.

Per day average volume sales of petrol for IOC, Bharat Petroleum and Hindustan Petroleum put together went up from 4,145 kilo litre in 2005-06 to 5,858 kilo litre in 2006-07. Their diesel sales went up from 6,828 kilo litres per day in 2005-06 to 10,560 kilo litres per day in 2006-07.

"Branded fuels not only provide an extra mileage of between 4-6 per cent but also reduces the maintenance cost of automobiles," said P K Mishra, deputy general manager, retail sales, IOC. "Oil companies, too, have a positive margin from these fuels," Mishra added. 
 

Brand rising Volume growth in sales of branded and non-branded petrol and diesel in 2006-07 over 2005-06 (in per cent)
	Petrol	Branded  petrol	Diesel	Branded diesel
Industry	6.90	41.00	7.80	55.00
IOC	7.00	40.88	12.00	40.00
BPCL	0.00	32.00	12.00	122.00
HPCL	NA*	32.00	NA*	47.00
Source: Indian Oil Corporation & Bharat Petroleum * Not Available

IOC data show that conversion from regular to premium petrol in India is 20.1 per cent. For diesel, the conversion rate is 12.1 per cent. However, the base for diesel is larger than petrol.

IOC Marketing Director GC Daga had earlier said that the company had seen an increase in the conversion rate from 13 per cent in 2005-06 to 23 per cent in 2006-07 for XtraPremium petrol and from 11 per cent to 17 per cent for XtraMile diesel.

BPCL data show that the conversion rate to premium petrol increased from 20 per cent in 2005-06 to 26 per cent in 2006-07. For diesel, this went up from 5.68 per cent to 10 per cent.

Bihar and Gujarat have been the front-runners in the switchover. For IOCL's branded products, Gujarat has shown a conversion rate of up to 30 per cent, followed by Bihar with a 29.3 per cent conversion rate. For diesel, Bihar has clocked the highest conversion rate, of 22.4 per cent.

IOC being a more highway-centric brand, BPCL and HPCL have a better presence in the urban centres.

The companies are now focusing on the non-automobile areas like pumps and generators. IOC has already started demonstrations to users of pumps and DG sets, according to Mishra. IOC uses 25-30 per cent of its branding budget for premium fuels.

The three PSUs have also spread their reach into tier-II and tier-III cities. IOC has made premium petrol available at 45.8 per cent of its 16,542 outlets. Premium diesel is sold at 57.3 per cent of its outlets.

Out of BPCL's 7,798 outlets, 29.2 per cent sell premium petrol and 18.1 per cent premium diesel. Out of HPCL's 7,986 outlets, 25 per cent sell premium petrol and 38 per cent premium diesel.

The companies foresee don't perceive any threat to the regular fuel. Mishra said convincing the bulk-users of fuel like truck-owners would not be easy.