 "Increased road construction activity sees higher bitumen sales for OMCs")
The government’s thrust on road infrastructure has led to a rise in demand for bitumen products, prompting some oil marketing companies (OMCs) to increase its production for better margins.
According to data from Petroleum Planning Analysis and Cell (PPAC), bitumen’s monthly consumption growth rate has been constant year-on-year (y-o-y) since August 2015, except a dip in July 2015, owing to monsoons.
“As rains have tapered off, bitumen consumption registered a growth of 5.4 per cent during September 2016 and a cumulative growth of 9.7 per cent for the period April to September 2016. The government has kept the development of roads at a high priority through various programs,” the PPAC report for September 2016 noted. Bitumen is a key raw material for road construction in the country.
Among the three oil marketing companies, Indian Oil Corporation (IOC) is the market leader in the bitumen segment.
For some like Hindustan Petroleum Corporation Ltd (HPCL), the rise in growth in bitumen has led to the company’s increasing its focus in the bitumen segment. “It (HPCL) produced 32 per cent higher bitumen in FY16 to capture strong demand in this profitable segment. It purchased higher quantity of bituminous crude, which allowed it to produce almost 32 per cent higher bitumen, for which demand is growing at 10-15 per cent a year due to pick-up in road construction,” according to IIFL research report on HPCL, which further added the company looks to capitalise on opportunistic gains in the market.
An e-mail query sent to HPCL and IOC remained unanswered.
Also Read
“IOC is maintaining its production profile and HPCL has stepped up its production and looking to do more if there is sustenance of demand,” said Harshvardhan Dole, analyst from IIFL Research. “Bitumen sales will continue to remain strong,” he added.
Others like Bharat Petroleum Corporation Ltd (BPCL) have also improved marketing strategies in this segment. “BPCL continued its growth in the Bitumen product segment and registered a 5.92 per cent growth in 2015-16, thus providing robustness to Indian roads. To improve customer service, marketing of imported bitumen was initiated at Haldia to cater to the demand of east and north-east regions,” the company said in its 2015-2016 annual report.
For BPCL, however, while the share of production rose, its market share fell marginally. As of March 2016, the company held a 16.2 per cent market share in the bitumen segment lower from 16.8 per cent in the previous year.
An e-mail query sent to BPCL remained unanswered.
In its FY17 Budget document, the Union government committed a total of Rs 97,000 crore as investment in the road sector, including the Pradhan Mantri Gram Sadak Yojana (PMGSY) allocation. The Budget document also noted plans to approve nearly 10,000 km of national highways in 2016-17. Even as the National Highways Authority of India (NHAI) moves towards awarding cement road projects, the PMGSY might continue to fuel the bitumen demand.