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India: Rosneft and BP entry may fuel retail competition

India's fuel retailing sector is poised for unprecedented competition with Russia's Rosneft and Britain's BP set to operate petrol pumps with global best practices, which can shake up the state dominated sector and give consumers international quality service.

India: Rosneft and BP entry may fuel retail competition


India's fuel retailing sector is poised for unprecedented competition with Russia's Rosneft and Britain's BP set to operate petrol pumps with global best practices, which can shake up the state dominated sector and give consumers international quality service.

Armed with fat balance sheets and a welcoming government, these aggressive oil biggies can challenge the dominance of state firms, which have 95% share in the business.This will also pose a stiff challenge for Reliance Industries, which also has a presence in fuel retail.

Pump owners and state firms are already talking about how foreign firms can snatch their customers with sleek marketing, branding and international quality services. BP Plc has just received a license to set up 3,500 pumps, while Rosneft will inherit 2,700 retail outlets following a deal to acquire Essar Oil.

Foreign oil producers, struggling with low oil prices for 2 years, are targeting large markets such as India. Saudi Aramco, the global giant with $13 trillion worth of reserves, and France's Total have also shown interest in marketing fuel in in India, the fastest growing major economy and third-largest oil consumer in the world.

Their strong resolve, rich global experience, brand equity and the big pile of cash will range against the incumbents' local experience, a sturdy network of filling stations and supplies across the country.

«BP and Rosneft can put up a big challenge for the incumbents. If they are willing to spend, they can expect a fast roll out. With the government ready to welcome them with open arms, they shouldn't face many hurdles in securing supplies or expanding the network,» said Amresh Kapoor, former executive director at Indian Oil Corporation (IOC).

«Foreign players could introduce many global best practices that would help raise the service level and act as the key differentiator. With a heavy use of technology and innovation, they could win the market,» said Gaurav Moda, consultant at KPMG.

Pump owners are worried. «Foreign players might just take away our customers. With fresh look and equipment, advanced technologies, higher service level and brand equity , they will certainly have an advantage over us,» said Nitin Goyal, an office-bearer at All India Petroleum Dealers Association. State firms are alert. «We are fully geared to compete. New players are welcome. It will increase competition and eventually benefit customers,» said BS Canth, director-marketing at IOC, the country's largest fuel retailer.

Canth said state firms learned their lesson a decade back when Reliance Industries came from behind to grab a big chunk of the market. «Our systems are ready . We have back-end logistics in place and a huge network in all regions.» Foreign players would have to learn the local business nuances to compete with us, Canth said.

«Most of the challenges will happen on the highways where diesel is the most dominant fuel. Here, the key would be to catch the fleet owners,» said Moda.

Diesel sales are three times that of petrol. In the current fiscal, diesel sales are up 3% while petrol has risen 10.5%. Diesel price decontrol in 2014 brought back private players such as Essar Oil and Reliance Industries to fuel retailing they had exited almost a decade ago after crude spike had reintroduced regulation.



Author: Sanjeev Choudhary


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