Oil is well that sells well

Mumbai: With the Central government determined to take away the administered price mechanism (APM) in the oil sector from April next year, oil companies are bracing up to face challenges in the form of competition in the post-APM period.

Not only has the government decided to dismantle the APM, but it has made its intentions clear to disinvest its stakes in public sector oil companies like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL). The intention is to make itself strong to face competition from not just existing players, but international retailing companies, who are poised to sell oil products in the Indian market once it gets completely opened up.

IOC has adopted the ownership route to tighten its grip on the retail market. Under this strategy, the company plans to convert a large number of its leased outlets into owned ones, which will prevent them from retailing oil products of other competing companies. IOC has been buying out these retailers by paying a good price and ensuring ownership.

BPCL is trying another strategy - of luring customers by ensuring that they get pure for sure products, that is if they buy them from BPCL outlets. Its hoardings read: Your search for pure fuel ends at our petrol pump. BPCL had earlier appointed the consultancy firm McKinsey to advise it on the strategies it should employ to ensure customer loyalty. The company already has a smart card in place, Petro Card, which, it claims, has over three lakh subscribers. The card, which enables subscribers to buy petrol on credit from select BPCL petrol pumps, also lets them earn points that can be exchanged for free petrol after some period.

IOC already has in place a co-branded credit card, in association with Citibank, which ensures holders get petrol or diesel on credit from select IOC retail outlets, earn points and then exchange them, in the same way as BPCL, for free oil later. Lately, HPCL has also entered the co-branded card segment, in association with ICICI Banks credit card.

Earlier retail customers were the ones ensuring customer loyalty; now oil companies too have realised its importance. Hence BPCL has decided to offer value-added services like consultancy on cost control and offer advice and technical help in efficient use of petro-products. Similarly, IOC has decided to pay special attention to them in terms of service by putting in place a special cell.

IOC, however, admits that it will be a difficult and challenging task to retain bulk customers as even a small variation in the end products price could mean a huge amount of saving for the users. Thus, one of the strategies that the company plans to follow is to offer price advantages and long-term contracts, though there is no official confirmation about it.

One aspect is vivid. Life in tomorrows oil sector is going to be more challenging and exciting.