Financial Daily from THE HINDU group of publications
Tuesday, Jul 20, 2004
Standards & Benchmarks
Industry & Economy - Petroleum
Marketing - Retailing
Reliance, Essar: Changing the rules of fuel retailing
The Reliance petrol pump in Navi Mumbai. Paul Noronha
Mumbai , July 19
A SOFT bright green-and-blue signage looms far ahead along the highway near the Dhirubhai Ambani Knowledge city in Navi Mumbai. On moving closer, swanky steel fuel dispensers under a large concrete canopy, smart, courteous youngsters in deep blue uniforms and the ambience of no-nonsense professionalism beckon the customer.
This RIL-owned petrol pump has been around for more than seven months, but the Reliance sign still takes the Indian driver by surprise. Ditto with the attention-grabbing deep crimson Essar Oil signage quietly lining interior roads along the West coast.
Do these ROs (retail outlets) make any difference to customers? Mr Ketan Vakharia, a Navi Mumbai businessman,who has been buying fuel at RIL's flagship RO, for the past six months believes that the brand is new to retail business and hence away from the adulteration networks.
Reliance has a computerised system for fuel delivery - complete with GPS-fitted trucks. The trucks carrying fuel from the company's Jamnagar refinery to the retail outlet and the underground fuel tanks are sealed with special Finnish Abloy locks worth Rs 2,500 each, says a senior Reliance official. Tanks and fuel dispensing units are all connected to a mother computer, which keeps a tab on fuel volumes.
There is an obvious emphasis on standardisation at all outlets (almost all Reliance ROs are company-owned-company-operated) with uniformed attendants wielding computer-linked hand-held devices, operating imported Japanese pumps.
"There is absolutely no place for adulteration," says a senior Reliance official.
At Essar's dealer-owned petrol station on the outskirts of the city, the technology emphasis is considerably milder. But dealer Mr Vinod Motwani insists quality of the imported fuel is comparable with that of branded fuels marketed by State-owned oil companies.
"The imported product comes from JN Port and one of my attendants goes to the port everyday to bring in the truck," he says.
But pure-fuel assurance is only one of the magnets for attracting the vehicle users. And has been used by PSU competitor BPCL, long before the two companies entered the markets.
While Reliance initially distributed food packets to truck drivers, apart from the usual services such as clean rest rooms, water, etc., it has refrained from competing with its established counterparts IOC, BPCL and HPCL over fuel prices.
Essar Oil Ltd has, on the other hand, made lower prices its primary USP.
"Diesel sold here is cheaper by almost Rs 1.50 per litre than the nearest RO. This makes a difference to my overall earnings at the end of the day," says Mr Pandurang Patil, a rickshaw driver at Ulhasnagar buying diesel at Mr Motwani's petrol station.
It has not only offered petrol cheaper by 30 paise, but has also tried to win over dealers with promises of higher commissions on higher sales.
According to an Essar Oil dealer, the company has offered a 5 per cent interest on the dealer's investments in the retail outlet and another 5 per cent interest on land value. This, in addition to 10 per cent higher commission on sales above 300 kilo litres of fuel.
Unfortunately for the customer, the lowering of prices has not resulted in a full-fledged price war considering Essar has only 63 outlets across Maharashtra, Gujarat and Punjab. When compared to PSU giants with networks of more than 2,000 outlets each, it seems like the Indian customer will have to wait a while before competition ushers in true competition; and lowers prices.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line