Reliance plans petro-retail push in cities

At least 400 outlets to be in cities in first phase

Reliance Industries (RIL) will roll out its petroleum retailing network in cities and metros too. The company, which had till now concentrated on the national and state highways, has decided to have at least 20 per cent of its retail outlets in the cities in the first phase.

RIL is planning to set up about 2,000 retail outlets in the first phase. It currently, has about 300 dotting the highways.

The company followed this strategy since India is predominantly a "diesel economy" with 45 million tonnes of diesel consumed annually compared with 12 million tonnes of petrol.

RIL has received government approval to set up over 5,800 retail outlets, one of the largest retail networks by a private sector oil refining company.

"Our initial focus was on marketing high speed diesel (HSD) along the highways. The petrol sector with high margins has been equally attractive ," said a senior executive director with Reliance Industries.

The executive was speaking at the sidelines of a two-day conference on 'India oil and gas retailing distribution 2005' organised here today by Infor-Media India.

With over 300 retail outlets up and running, the company has established its presence and "we are now learning to get into the city which is not very easy", he added.

While admitting that the cost of land in cities and metros were prohibitive, the RIL executive claimed that the company was looking at franchisee model with the first of the 10-15 retail outlets to come up by March 2005.

Of the 2,000 outlets, Reliance intends to have at least 450 fuel stations as company owned company operated (COCO) with the balance 1,550 will be based on franchisee model.

RIL is also looking at several franchisee model including shared investment by the company and dealer and another model where investment is done by the dealer at the retail outlets. This retail outlet is then leased back to the company.

"In case of the shared investment, the margins are shared equally by Reliance and the dealer. Whereas, the margins are high for the dealer who invests and leases out the retail outlet to the company," the executive claimed.

Reliance, however, intends to keep a tight control on each retail outlets "by making use of technology". The retail outlets are connected through Reliance Infocomm's broadband network.