The government’s move to allow home delivery of petrol and diesel has clearly delighted a few companies who have been working on this business model. This announcement could change the rules of the game on how petroleum products are sold. We look at some of the players who could benefit from this move.
Also Read: The Dangerous Business of Home Delivery of Petrol and Diesel
1. Reliance Industries
The biggest beneficiary of the government’s initiative to allow home delivery of petrol and diesel is likely Reliance Industries. Reliance Industries chairman and managing director, Mukesh Ambani was recently quoted saying, “data is the new oil”.
Those words have new meaning now, as this move has the potential to allow Reliance to bounce back in the fuel retail space. It’s already giving you gigabytes of data on your smartphone, but it has a lot of catching up to do in terms of fuel supply for your car.
Reliance today has only about 1,400 fuel outlets across India – after reopening pumps in 2015. Reliance had entered the fuel retail business in 2004 and had changed the way fuel was dispensed with its state-of-the-art dispensers. Its fuel (both petrol and diesel) was also seen as being better than that supplied by state-run oil companies.
However, when petrol and diesel prices began to rise, the government kept them in check and offered subsidies to state-run players. At one point, the loss faced by retail outlets was over Rs 13 per litre of petrol and nearly Rs 21 per litre for diesel.
The government made good this loss to state-run retail outlets, but not to private players like Reliance. This forced Reliance to close its petrol and diesel pump network in late 2008.
However, once petrol price was deregulated in 2010, the opportunity for private players to get back on a level playing field with public-sector units such as Indian Oil, Bharat Petroleum and Hindustan Petroleum opened up. And then diesel was deregulated in 2014.
In 2015, Reliance announced it was reopening almost all its 1,400 plus retail outlets. However, the competition is huge.
There are nearly 60,000 petrol pumps in India. Indian Oil accounts for over 26,200 outlets nationwide. Bharat Petroleum has nearly 14,000 outlets and Hindustan Petroleum has nearly 14,500 pumps.
That leaves Reliance with a market share of less than 2.5%, with Essar owning about 3,500 outlets, and Shell with less than a 100.
Acquiring land and setting up pump infrastructure is going to be a slow and expensive affair for Reliance. However, the Petroleum Ministry’s announcement has come as a windfall, as a mobile bowser (fuel truck) costs far less to set up and run.
Of course, these need to conform to the Petroleum and Explosives Safety Organisation’s standards. From the looks of it, Reliance is up to the task and could actually be a disruptive force in this segment.
2. Essar Oil
Essar is another private oil company that got into the space rather late. In 2010, when petrol was deregulated, Essar opened its pumps, primarily retailing petrol. In 2014, after the deregulation of diesel, it got into selling diesel too. Essar also has a lot of catching up to do, with only a little over 5% market share.
By deploying mobile fuel bowsers to home-deliver petrol and diesel, Essar can directly get these trucks to supply fuel from its storage depots in cities, saving on land and infrastructure investment for petrol pumps.
3. Instafuel
While Reliance and Essar appear to be the two big private players who will benefit from the move to supply petrol and diesel products directly to the customer, there are a few start-ups that have got into this area.
One such start-up is Chandigarh-based Instafuel. The month-old startup, which has a namesake with the same model in the US as well, has been supplying diesel in and around Chandigarh, primarily for generators and private cars.
Pavi Rampal, one of the directors of Instafuel, told The Quint that the start-up has five Isuzu D-Max vehicles to supply fuel, and these meet the safety standards to transport diesel fuel. The licensing conditions state that a license is not required to transport fuel less than 1,000 litres, according to Chapter 10, Section 7 of PESO.
With this announcement, there are a couple of other companies we hear of – called Fuel Buddy and Synergy – who are also building apps and setting up infrastructure to deliver fuel directly to the customer.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)