Reliance Industries announced its plans to re-initiate its petrol pumps till March, 2016. The decision came after the government deregulated fuel prices in October,last year, which enabled the private giants to compete with the State-owned retail outlets.
In a recent annual report, Reliance Industries mentioned that 300 of its fuel outlets became operational by the end of Financial Year (FY) 2014-15. The company has decided to re-open all of its 1,400 fuel pumps by the end of FY 2015-16.
Impact of subsidies and deregulation
Reliance Industries operated 1,400 petrol pumps in 2006. However, it was forced to shut them.
The government started giving subsidies to the State-owned companies.These were given to benefit the poor and protect them from inflation. The State-run outlets sold fuel at prices much cheaper than the private retailers. As a result, private outlets were forced to close down.
However, the State-run retailers suffered heavy losses, later.The government thusderegulated petrol in June, 2010 and later, diesel in October, 2014, letting the private players to bounce back.
Scenario in 2006
According to Reliance Industries, industry volumes of fuel sold in 2006 was 40 million tons per annum. This has now increased twice to reach at 80 million tons. It also said, as India’s Gross Domestic Product (GDP) will grow, the demand for transportation fuels will also significantly grow.
India has around 53,000 fuel outlets across the country. Most of these are operated by the state. In 2006, the country had 31,000 fuel pumps.
Apart from Reliance Industries, Essar Oil Limited was the only private fuel operating company at that time. The two organizations had together seized 17% of domestic retail market for diesel and 10% of petrol retail market. Reliance Industries alone had a market share of 14.3% in diesel and 7.2% in petrol.
The government subsidies severely impacted the sales of the private companies. As a result of heavy losses, Reliance Industries had to close all its outlets in two years.
Plans of Reliance Industries
Reliance Industries is making heavy investments to re-establish its fuel retail network. The organization wants to quickly re-earn its market share.
“Post announcement of deregulation, prices of petrol and diesel are being changed in-line with international prices. This has presented an opportunity for Reliance Industries to re-enter the domestic retail market and ramp-up volumes to compete with local players,” its annual report said.
Reliance Industries has launched marketing campaigns for quick business. It has also started instant reward schemes and will soon begin its important and unique fleet management program known as Trans-Connect. Offering varied value added services, the company aims to attract maximum customers and capture the market, soon.
Other private companies
After the deregulation, Essar Oil started its 1,400 outlets. It has planned to start another 1,100 within a year.
Mangalore Refinery and Petrochemicals Limited (MRPL) last week said that it too will begin with fuel retailing by setting up 100 outlets.
Summary
Reliance will establish its entire fuel network by re-opening all of its 1,400 outlets by March, 2016.