Economic liberalization threw India open to competition in many fields, but what stayed conspicuously unchanged was the retail market for vehicle refuelling. Public sector petrol pumps have long dominated the landscape. Now, with Reliance Industries Ltd (RIL) having struck a joint venture (JV) with the global energy major BP Plc, real competition in this market may finally be upon us. In five years, the JV partners expect to have 5,500 stations across India. Apart from regular outlets, the JV has plans for mobile fuelling units and the home delivery of fuels.
It’s true that RIL has had pumps of its own for many years, but nine-tenths of the 65,000-odd stations are still run by state-run oil companies such as Bharat Petroleum, Indian Oil and Hindustan Petroleum. Apart from their signboards, there is little to tell one station apart from another; service levels do vary, but only a bit. In a truly competitive market, players would woo consumers through price differentiation, superior service quality, or some combination thereof. The most efficient of the lot would have an advantage, incentivizing the rest to keep up. So far, it has been more of a fuel-dispensing business.
As RIL-BP expands its network and attains a sizeable scale, perhaps we will begin to experience the actual benefits of private sector participation in this business. Since the JV would have access to RIL’s efficient refineries, it could gain a competitive edge and force public-sector retailers to get into better shape. Demand for motor fuels has been rising at a fast clip, and though electric vehicles are touted as the future, classic old petrol pumps will be around so long as fossil-fuel vehicles are still road-worthy.