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HPCL plans more Hamara pumps
Deepa Krishnan in Mumbai | October 07, 2005 09:39 IST
Stepping up its competitive edge over Reliance's branded petrol pumps, public sector oil giant Hindustan Petroleum Corporation Ltd has decided to increase its investment in its Hamara brand of pumps for the rural segment this year. It is expected to more than double such outlets this year from 450 to 1,000.
On the company's strategy, S P Chaudhry, executive director - retail, said, "The rural segment is providing good return on investment of up to at least 50 per cent, especially since it is a high return on low investment model. We are able to maintain a minimum internal rate of return of 15 per cent, which enables us to carry forward our retail plans for the fiscal."
Every pump in the rural segment costs HPCL between Rs 10 lakh (Rs 1 million) and Rs 15 lakh (Rs 1.5 million). In comparison, in the urban and semi-urban areas the investment for the same would be around Rs 1 crore (Rs 10 million).
The cost is borne by the company and includes that of land acquisition, which is generally lower in the rural areas. The average throughput across rural outlets is up to 80 kilolitre per per month.
"In order to break even, the average throughput of a pump has to be at least 30 kilolitre per month, which is much below the average that our pumps maintain," Chaudhry said.
Hamara Pumps have also tied up to sell a number of other agriculture oriented products such as fertilisers, farm equipment and better quality seeds. "In the process, HPCL becomes a dealer in the region, and the farmer accrues better earnings," he said.
The company has earmarked Rs 740 crore (Rs 7.4 billion) for investment in the rural sector this year - up from the previous year's Rs 680 crore (Rs 6.8 billion). While HPCL is facing competition from private players in the highway segment, losses are tipped to be lower compared with other public sector companies - at 0.4 per cent compared with an average of 2 per cent.
HPCL is also planning to pump in Rs 101 crore (Rs 1.01 billion) to scale up operations in selected 400-500 pumps. Over the next few months, before the end of the fiscal, 700 new outlets are expected to be set up.HPCL has a total of 6,667 retail outlets as of March 2005.