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Sale of petro products likely to grow 6-8%

Fakir Chand in Bangalore

After two years of continuous downslide, sale of petroleum products across the country has turned for the better, registering a growth rate of 4-5 per cent during the first five months of the current fiscal.

Though core sectors of the economy are still trying to wriggle out of the prolonged recession, the petroleum companies driven by the consistent growth of the 2-wheeler and the passenger car segments during the last 2-3 quarters are likely to register a positive growth of 6-8 per cent in sales by the end of the current fiscal.

N K Puri, director (marketing) of Hindustan Petroleum told rediff.com in Bangalore that the phenomenal rise in sales of 2-wheeler vehicles, especially motorcycles to the tune of 25-30 per cent, and 10-15 per cent growth rate in the sale of automobiles have seen a reversal of the negative growth or flat trend in the off-take of petro products on the retail front across the country.

"Keeping in view the projections being made by these two sectors for the rest of the current fiscal year, the three oil majors (Indian Oil Corporation, Bharat Petroleum and HPCL) are upbeat that sale of petrol and diesel will pick up momentum to post a growth rate of at least 6-8 per cent by the year-end," Puri stated.

The revival of a delayed monsoon and spread of good rainfall in many regions of the country will also augur well for the agriculture and transport sectors, as their stepped-up activities will increase the off-take of diesel and other petroleum products.

"The onset of the festival season, followed by the winter months will see an increase in demand for all types of fuels, pushing their sales to register a positive growth this year," Puri affirmed.

Asked about the impact of frequent price rise in petrol and diesel products on the growth rate, Puri said it would not be much as the fluctuation in prices was directly in line with the global oil prices, and their increase or decrease was being maintained in a price band, keeping in view the market forces such as inflation rate.

"Though an independent regulatory authority is yet to be set up by the petroleum ministry, the state-owned oil companies are still governed by the directives of the government to prevent any drastic impact of price rise in petrol or diesel on the economy as a whole," Puri disclosed.

Company officials hinted that if there was a major rise in crude oil prices on account of the prevailing uncertainty in the international situation such as the ongoing US-Iraq standoff, the government may ask the finance ministry to step in and cushion the domestic prices with a reduction in import duty on petro products instead of burdening millions of customers with steep hikes from time to time.

At the same time, Puri claimed that the oil companies have been witnessing a sharp rise in the use of branded petrol and diesel products, introduced in select markets recently in spite of pricing them marginally higher than the regular unleaded petrol and ultra low sulphur diesel.

"Ever since we have introduced these branded products in select retail outlets in some parts of the country, we have seen a growth of about 40 per cent in their sales as discerning customers have seen the benefits of such fuels with specially imported additives, which clean the fuel injection system and combustion chamber, and prevent the formation of any harmful deposits," Puri averred.

As new generation vehicle owners are required to buy additives separately and mix them in the fuel tank each time they fill it with petrol, HPCL's branded products such as Power and Turbojet will obviate the trouble of buying and mixing separately.

Referring to the entry of new players such as ONGC and Reliance in the retailing of petro products of mass consumption, Puri said the state-owned players were gearing up to take on the competition and face the dynamic pricing strategy, which has become the norm in those countries where the commodity had been totally de-regulated.

"The ensuing competition from among the existing and newer players will lead to the era of dynamic pricing strategy that may include under-cutting of prices or a lot of freebies doled out as part of value added services to retail customers hooked all along," Puri asserted.

Going by the trends, in a complete de-regulated environment, apart from market forces of demand and supply, and international crude oil prices, the pricing strategy will be a key factor in either retaining or capturing new market share, including that of niche segments.

"Ever since the business of downstream products of crude oil such as lubricants, specialities and greases have been thrown open for private and international players as part of the deregulation, a number of domestic and foreign companies have entered the fray with a dynamic pricing strategy to share a pie of the multi-billion rupee market.

Products like petrol and diesel will also witness similar trends, with which customers alone will be the direct beneficiaries," Puri said, and likened the possible scenario in the oil commodity to that of other consumer durables and services such as telecom.

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