Fuel retailers set to expand network after four-year gap2 min read . Updated: 29 Aug 2018, 11:27 PM IST
IOCL, BPCL and HPCL have an ambitious plan to open a combined nearly 50,000 fuel outlets over the next three years
Mumbai: Indian Oil Corp Ltd (IOCL), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) are set to expand their fuel retail network after a gap of nearly four years.
The three state-run companies have an ambitious plan to open a combined nearly 50,000 fuel outlets over the next three years, said officials at IOCL.
“With over 50,000 new fuel stations and liquefied petroleum gas (LPG) distributorships coming up in the next few years, benchmarking to global standards and generating additional revenue streams from non-fuel business is an idea worth exploring by the oil marketing companies (OMCs)," Sanjiv Singh, chairman, IOCL, told shareholders at an annual general meeting in Mumbai on Wednesday.
BPCL and HPCL did not comment on Singh’s announcement.
The companies are expected to formally announce their plans over the next two to three weeks, an IOCL official said on condition of anonymity. It costs between ₹ 60 lakh to ₹ 3 crore to open a fuel outlet depending on the location.
“Locations need to be decided carefully lest there be duplication. So the OMCs have for the first time come together to work on such a scale," said a second IOCL official, who declined to be named.
Of the proposed number, IOCL may set up 25,000 retail outlets, with BPCL and HPCL opening 12,500 each.
IOCL currently has 27,185 retail outlets, HPCL runs 15,127 and BPCL operates more than 15,000.
“Though we plan to set up 50,000 retail outlets, we may be able to set up only 35,000 as the strike rate is only 20% of the advertised sites," said an official from another OMC requesting anonymity.
The OMCs seek applications through newspaper advertisements whenever they plan to open outlets in new locations.
However, since 2014, the OMCs have not set up new outlets as rules were amended, but not approved by the oil ministry. This prevented them from issuing new advertisements.
“The three OMCs are doing this exercise together for the first time. In 2014, we undertook a ‘de-duplication’ exercise to ensure we do not set up retail outlets in each other’s location to avoid eating into each other’s business," said the IOCL official quoted above.
Retail outlets opened after 2014 were largely through the revival of old stations or restoration of dealerships that had been terminated because of non-performance since 2005.
Under the new dealership guidelines, the educational qualification for a dealer has been lowered to 10th pass from the previous requirement of being a graduate and the upper age limit has been raised to 60 years from 45.
The OMCs plan to expand in Tier II and III cities as well as rural areas as they lack presence in these geographies. In urban areas, the companies have already reached saturation point.
Dealership for allocation of retail outlets would be decided by a lottery system that the OMCs introduced in 2014 to bring in greater transparency. The companies already follow the lottery system in the allocation of dealerships of LPG.
“The new policy would be notified shortly. A lottery system will clear the myth that the allotment of fuel retail outlets is rigged," said the marketing director of an OMC, who did not wish to be named.