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Rediff.com  » Business » Dealers seek govt nod for multi-brand fuel outlets

Dealers seek govt nod for multi-brand fuel outlets

February 20, 2013 13:30 IST

If the government and its oil marketing companies pay heed to the dealers’ demand, you might soon find multi-brand fuelling stations, where customers could buy the diesel or petrol brand of their choice.

“We have presented the idea before the authorities and will soon send a letter to the ministry in this regard. If this gets implemented, pump owners would earn better margins, while customers would have the choice to buy their desired fuel - like selecting items in a super market,” said Ajay Bansal, general secretary, Federation of All-India Petroleum Traders. The current agreement says a dealer of a state-owned firm is allowed to sell only that firm’s products.

With speculations rife on dealer-owned-dealer-operated (DODO) pumps shifting to private players in the decontrolled diesel price regime, the Federation of All-India Petrol Traders has demanded the sale of multi-brand products be allowed at DODOs. This way, margins could be improved by selling products of state-run companies like IndianOil Corporation, Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum, besides those of private companies like Reliance Industries and Essar Oil - all under one roof.

Of the 42,000 pumps that fall under the association, almost 60 per cent are DODOs, while close to 39 per cent of the remaining are company-owned-dealer-operated (Codo) ones. “Only 100-odd stations are company-owned-company-operated (COCO). Even if dealers want to shift to private parties, their choice might be the Codo model,” Bansal added.

At present, the dealers of private players have the option to go for dealership contracts with other companies, too. Once decontrol is completely in place, private companies are expected to expand aggressively, challenging the public sector undertakings. Asked whether a company would go for Cocos in the decontrolled regime, an Essar Oil spokesperson said: “Our current model is DODO-based. Except one or two COCOs, the remaining 1,400 stations we have are on the DODO model.”

The petroleum ministry had recently barred state-run companies from investing in their own pumps. Through an order, it asked retailers to set up pumps only if a dealer was willing to bear the average cost of Rs 1-1.5 crore needed for one. According to experts, the private sector owns a little more than 2,500 fuelling stations in the retail space.

A major concern for private companies now is that they have to compete with public sector counterparts, who enjoy the subsidy cushion from the government; and, once decontrol happens, there should be a level-playing field for all. Because of this, when oil prices shot up in 2008, RIL had to close its pumps.

The decontrolled regime might also see the entry of private companies into the bulk sales category. The government had also announced dual pricing for retail and bulk customers, which is threatening to wipe off the bulk revenue enjoyed by oil companies.

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