The Sunday Story With the introduction of special duties on branded fuels in 2009, their sales volumes took a beating
The impact of the pricing policy for widely consumed petroleum products such as petrol, diesel and cooking gas has been felt across various segments. For the public sector oil marketing companies, it has meant a scaling down of branding initiatives and maintaining a rather low profile.
Several of the concepts promoted by the companies with much fanfare at the height of competition to enhance value for customers and attract more of them about 10 years ago have been put on the back-burner.
A case in point is the branding of retail outlets: BPCL initiated it with Pure for Sure outlets, followed by HPCL and its Club HP brand and IOC with Extracare range of bunks. An associated initiative was the launch of branded fuels such as Speed, Power and Extra Premium.
Branded fuels were launched when new generation cars were hitting Indian roads, and the consumer did not mind paying a little extra for additional features. “We wanted to offer Indian customers state-of-the-art fuels that matched their automobiles,” says an IOC official.
Not many extra processes were required as the companies had to essentially only add some additives to petrol and diesel. The fuels offered multiple benefits, including a smoother ride, quicker and better pick-up, engine cleanliness and, as a consequence, more mileage. The branded products were also eco-friendly and the going was good for five years, till 2007. The price difference between the regular and branded petrol was Rs.1.50 a litre, and in the case of diesel, it ranged from 40 to 75 paise.
“But with the introduction of special duties on branded fuels in 2009, their sales volumes took a beating. The last straw was the withdrawal of subsidy on branded fuels recently. With that, the volumes dropped dramatically and the network which offered these branded fuels, too, has shrunk. The current high price differentials between regular and branded fuels have literally forced the latter to go out of market,” says N. Srikumar , Executive Director (Corporate Communications and Branding), IOC.
In terms of volume and the number of outlets selling branded fuel, there has been a decline over the years. In 2007-08, the combined sale of branded petrol of the OMCs was 33 lakh kilolitres (KL), which declined to 21.18 lakh KL in 2009-10 and 9.24 lakh KL in 2011-12; up to September, the total sale was about 3.26 lakh KL. As for the number of outlets that dispensed branded petrol, it was down to 6,147 last fiscal from 13,521 in 2007-08. In the first six months of the current fiscal, the number of such outlets dropped to 5,974.
Diesel also down
The sale of branded diesel also followed a similar course. From an industry sale of 58.22 lakh KL in 2007-08, it dropped to 3.15 lakh KL last fiscal, and in the first half of 2012-13 a paltry 67,946 KL was sold. The number of dispensing outlets in the same period dropped from 18,609 to 4,062. In the first half of the current fiscal, it declined to 3,830.
On the impact of under-recoveries on branding, Mr. Srikumar says: “It is true OMCs have scaled down investments in direct branding activities in the last few years, mainly on account of the fact that the bottom line of these companies has taken a huge beating in the past 5 to 6 years. It has necessitated prudent spending and even practising austerity measures. This has, however, not completely ruled out branding plans as such. New innovative methods which are cost-effective have come into play.”
The former national vice-president of the Federation of All India Petroleum Traders, M. Kannan, says customers nowadays don’t even enquire whether branded fuel is available.
For dealers continuing to stock up on the premium products, it is a dead investment as even those owning the new generation expensive cars have become cost-conscious. The price differential, as per the IOC rates, is upwards of Rs.8 a litre for branded petrol and over Rs.18 for branded diesel.
“Given the current high price differential, there are few takers for branded auto fuels. Indeed, this is unfortunate given the fact that OMCs assiduously built these brands in the past one decade, investing in technology and network expansion, only to ensure that we provide choice to consumers through better products,” says Mr. Srikumar.
Not everything is lost, says an official of BPCL, as the company is planning to take its branded retail outlets to smaller towns and cities. In major cities, it will come with a new ‘Platinum’ brand as an increase in the number of vehicles on roads means more customers and competition.