Highways become prime location for fuel retailing
Mumbai: To expand its fuel retail network to 5,500 outlets, Reliance Industries Ltd and BP may look at having a presence on the national highways, as it is an underserved segment in the country. With oil marketing companies planning to set up over 80,000 petrol pumps in the next three years, highways, according to officials, are the most coveted destination.
"If you look at the fuel demand scenario in the country, all companies are optimistic about the retail business. Presence on the highways will be attractive for them as it is an underserved segment," an OMC official said on the condition of anonymity.
Reliance Industries and BP's announced a new joint venture on Tuesday to set up 5,500 fuel retail outlets. Oil marketing companies — Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — have decided to set up close to 80,000 fuel retail outlets in the next three years.
But given the success rate of around 15-20%, OMCs may only be able to set up 13,000 petrol pumps in the next three years. A low success rate could be due to the cumbersome land approval process. More often than not, land is not approved and even if it is, in many cases, it goes into litigation.
OMCs plan to expand in Tier-II and Tier-III cities as well as in rural areas. In urban areas, they have reached a saturation point.
But RIL and BP's plan could also mean they would eat into the marketshare of OMCs. At present, OMCs dominate the domestic fuel retailing segment with 90% stake, while RIL along with Essar Oil and Shell India share the remaining 10%.
RIL, which had a 12% marketshare in fuel retailing in 2005, saw its marketshare slip to less than 0.5% in 2014, by when it had shut most of its petrol pumps after sales plunged as it could not match the subsidized price offered by state-run fuel retailers. RIL had spent ?5,000 crore in setting up 1,470 retail outlets between 2004 and 2006.