Indian Oil, HP, BP lose market share to Reliance, Essar, Shell

Mumbai: State-run oil marketing companies Indian Oil Corp. (IOC) Ltd, Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) lost nearly 12 percentage points market share in the fuel retailing business to private firms such as Essar Oil, Reliance Industries Ltd (RIL) and Shell India in 2016-17 according to three officials at the state-owned firms.

It was expected, the three added, and the companies are launching measures to not lose any more share and regain some lost ground.

“The sales volume growth suffered during fourth quarter, in the aftermath of demonetisation and growing competitive intensity, with IOC, BPCL and HPCL reporting a fall of 3.5%, 5.3% and 2.8% on year, respectively,” Nitin Tiwari, analyst at Antique Broking, said in a report on 5 June.

Tiwari said the drop in sales volumes was primarily due to lower diesel sales; sales of the fuel fell by 5% at IOC, 9% at BPCL and 7.4% at HPCL year-on-year versus an industry-wide sales decline of 4%, indicating loss of market share to private players.

Until last year, the three state-owned oil marketing firms together sold more than 95% of all petrol and diesel consumed in India.

Private fuel retailers held a 4% market share until last May, which has now grown to 12%, as they have expanded their networks.

“It was bound to happen. Essar has added over 1,000 retail outlets during the year. RIL started with 400 outlets and added over 900 outlets. However, larger impact on the market share came about after RIL launched a Re1 discount (on diesel) in March. Even a few paise matters to the truckers and fleet operators. Thus RIL gained more market share. But such discounts do not look sustainable going forward,” one of the three officials cited in the first instance said on condition of anonymity.

The trend is likely to continue for another year before it tapers off, another of the three added on condition of anonymity.

Spokespersons at the state-owned oil firms, RIL, Essar Oil and Shell India did not respond to emails seeking comment.

The third official cited in the first instance said on condition of anonymity that his company has already undertaken several measures to further its market share and beat competition, including providing travel benefits to truckers, automating retail outlets and strengthening customer loyalty programmes.

The private firms were very aggressive in the last three to six months, R Rajamani, executive director, corporate treasury at BPCL, said in an analyst call on 30 May, after the announcement of the company’s fourth-quarter results.

BPCL would see “how the competition played out” and respond appropriately, he added.

While petrol prices were deregulated or linked to the market prices of the fuel in June 2010, diesel prices were linked only in October 2014, making the fuel retailing market attractive for RIL, Shell and Essar Oil.

Historically, diesel was sold at subsidised prices in India, with the government compensating state-owned oil firms.

Private fuel marketers received no such subsidy, and were thus edged out of the market when crude oil prices climbed as high as $150 a barrel in 2008.

Fuel demand in India rose more than 3% in April against the same period last year, according to data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. Sales of gasoline, or petrol, rose 4.5% from a year earlier at 2.09 million tonnes.