The Hindu : Front Page : Oil marketing companies may retail only branded fuels

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Wednesday, May 14, 2008
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Oil marketing companies may retail only branded fuels

N. Ravi Kumar

It will help reduce their under-recoveries

Regular petrol, diesel from retail outlets may be phased out
Promoting branded fuel likely to figure at meeting in Mumbai

CHENNAI: Oil marketing companies such as Indian Oil Corporation are actively considering promoting only the branded, costlier petrol and diesel as a measure to curtail their mounting under-recoveries.

Though a senior official of one of the companies said the growing consumer preference for fuels with multi-functional additives drove the decision, industry sources say it could well be the beginning of the phase out of regular petrol and diesel from some retail outlets.

While an official of Hindustan Petroleum Corporation Ltd said the prospect of hard-selling branded fuels was tempting in the face of galloping crude oil prices, a senior executive of Bharat Petroleum Corporation Ltd said a meeting of the company officials in Mumbai is expected to discuss the issue..

IOC has initiated the process by identifying 1,000 outlets in 20 cities across the country that would be fully converted into branded fuels. This list includes 69 retail outlets in Chennai, of which the conversion is happening in 47, said N.Srikumar, Executive Director (Branding, Corporation Communications and Planning) of the company.

Volume growth

The countrywide volume growth for the branded fuel of IOC is 89 per cent for Xtrapremium petrol and 65 per cent for Xtramile diesel as against 10 and 11 per cent for the regular variety respectively, he added. And it is not without reasons customers are paying more as regular use of the branded fuels would mean cleaner engines, lower emission, less maintenance cost, and even more mileage.

In Chennai, a litre of regular petrol costs Rs.49.61 and diesel Rs.34.40. The price of the branded fuels varies marginally from company to company. In the case of branded petrol, the additional cost is between Rs.3 to Rs.3.20 a litre, while for branded diesel it hovers around Rs.1.25.

Reducing losses

By selling more branded fuel, the companies hope to reduce under-recoveries. “It is not about making profits, but cutting down out losses,” says Mr.Srikumar. Coming to their aid would be the freedom available to revise the prices of the branded fuels, unlike in case of regular petrol and diesel. In the last six months, the three companies increased the price of branded fuels at least twice.

It is this incremental cost that is possibly making other companies move ahead cautiously. According to R. Radhakrishnan, General Manager (South Zone) of HPCL, the decision to have a branded fuel is entirely dependent on customer preference.

An official of BPCL said the issue of aggressively promoting branded fuel was likely to figure at a meeting of the company officials in Mumbai shortly. Simultaneously, the company has started telling its dealers to create awareness about the branded fuels among their customers.

On the need for the companies to go ahead in unison, Mr.Srikumar said if IOC is going ahead faster, it does not mean others are not doing.

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