Oil firms see uptick in sale of branded fuel

After three years, sale of branded petrol and diesel is getting back to normalcy for the three government-owned oil marketing companies - Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPC) and Hindustan Petroleum Corporation (HPC).

The government OMCs say the price differential between branded and non-branded fuel has come down, though the sales in branded petrol are better than for branded diesel. Branded fuels are regular fuels with additives supposed to enhance a vehicle's performance.

Demand for branded petrol has picked up as it is used more by sports utility vehicles, multi utility vehicles and motorcycles. Branded diesel is used mostly by truckers and commercial vehicle owners, who do not opt for branded diesel if the differential is more than Rs 1 a litre. The going was good for branded fuels till 2007, when both sales and network expansions peaked. Then, the maximum difference between the two was Rs 1.50 a litre for petrol and 25-75p a litre for diesel. OMCs say they invested heavily in building these brands.

The concept of branded fuel came in 2002, when the petroleum sector started investing in marketing. With introduction of new-generation cars, the public sector oil firms decided to offer variants. Branded fuels were developed to cater to this need.

An HPC official said due to the drop in crude oil prices, that for regular fuel had come down. Thus, the differential between regular and branded fuel has dropped to Rs 2-3 a litre from the earlier Rs 9-10 a litre. "Thus, demand has seen an uptick," the official added.

Global crude oil prices have crashed from $110 (Rs 7,290) a barrel in June 2014 to a little less than $40 (Rs 2,659) a barrel currently. In Delhi, the current difference between branded and non-branded petrol is Rs 2.63 a litre and for diesel, Rs 3.01 a litre.

"Since June, we have seen sales pick up a bit, around three per cent more for branded petrol but for branded diesel it is still slow," said an official from IOC, which sells its branded petrol under the Xtrapremium brand and branded diesel under Xtramile. When the going was good for branded fuels, IOC's branded petrol commanded a 56 per cent market share and 52 per cent in branded diesel.

BPC's branded diesel is sold as Hi Speed Diesel and their branded petrol is called Speed. The company did not respond to an e-mailed questionnaire. However, an executive said it had also seen a rise in sales for branded fuel. HPC sells its branded fuel under the brands Power (petrol) and Turbo Jet (diesel). The government OMCs say due to various taxes and duties on branded fuel, the cost shoots up. The government levies excise duty of Rs 20.54 on a litre of branded petrol (see table) and Rs 14.19 on a litre of branded diesel.

In 2013, IOC had stopped sale of Xtramile at its retail stations. Though its distribution at its retail outlets has not picked up at the same pace as earlier, distribution for Xtrapremium has gone up from around 30 outlets to 2,000 at present. In 2007-08, during the peak period for sale of branded fuel, 10,000 IOC retail outlets were selling branded petrol. The company said it was targeting future annual growth of five per cent against three per cent at present.

IOC said it was pushing sale of Xtramile through new outlets. "We would be looking at urban markets more than highways. That is where we see the growth happening," said the IOC executive.