a study of important issues in allied petro retailing in india at selected bpcl petrol pump
DESCRIPTION
”A Study Of Important Issues In Allied Petro Retailing In India At Selected Bpcl Petrol pumpTRANSCRIPT
A PROJECT REPORT ON
“A Study Of Important Issues In Allied Petro Retailing In India At Selected Bpcl Petrol Pumps”
SUBMITTED BY
SHAHBAZ KHAN
(MARKETING)ROLL NO – B-01Batch 2011 - 2013
UNDER THE GUIDANCE OFDR. SANDEEP SAWANT
CORE FACULTY - MARKETING
UNIVERSITY OF MUMBAIKOHINOOR BUSINESS SCHOOL,
KURLA, MUMBAI.
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DECLARATION
I hereby declare that the project report entitled “A Study Of Important Issues In Allied Petro Retailing In
India At Selected BPCL Petrol Pumps”carried out at “Bharat Petrolium” is my work submitted in partial
fulfillment of the requirement for Degree of MASTER OF MANAGEMENT STUDIES (MMS),
UNIVERSITY OF MUMBAI from KOHINOOR BUSINESS SCHOOL, KURLA, MUMBAI and not
submitted for the award of any degree, diploma, fellowship or any similar titles or prizes.
Date: Signature: _______________
Place: Mumbai Student Name: ___________
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CERTIFICATE
This is to certify that the project entitled A Study Of Important Issues In Allied Petro Retailing In India
At Selected BPCL Petrol Pumps” is successfully completed by “Abhijit P Jaitapkar” during the second
year of her course, in partial fulfillment of the Masters Degree in Management Studies, under the University
of Mumbai, through KOHINOOR BUSINESS SCHOOL, Kurla, Mumbai-400070.
Date:
Place: Mumbai “Dr. Sandeep Sawant”
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ACKNOWLEDGEMENT
It is my privilege to express my gratitude and respect to those who guided and inspired me in the
completion of this project.
I am deeply indebted to my project guide of the Kohinoor Business School Dr. Sandeep Sawant for
giving me this opportunity to undergo my project in his esteemed organization and for his timely
suggestions and valuable guidance.
On the occasion of complete and submission of project,I would like to express my deep
Sense of gratitude to college HOD .Dr. Ms.Bharati Deshpande for providing me the
Platform of management studies
I also want to give thanks to Mr. Subhash Gawade .He constantly encouraged me and showed me
the right path from day one till the completion of my project.
I am also thankful to Mr. Dhananjay M. for helping me to proceed in conducting the survey and
complete it on time.
I am grateful to the Director, Faculties, administrative staff and the librarian of Kohinoor Business
School for providing me all the support required for successful completion of my project.
Shahbaz Khan
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INDEX
CHAPTER NO
CHAPTER NAMEPAGE
NO
1 INTRODUCTION
EXECUTIVE SUMMERY 1
RESEARCH OBJECTIVES 2
RESEARCH DESIGN AND METHODOLOGY 3
2 BACKGROUND OF TOPIC
INDIAN PETROLEUM SECTOR 5CURRENT PROFILE OF MARKETING &
DISTRIBUTION10
RECENT TRENDS IN PETRO PRODUCT
CONSUMPTION10
CURRENT PRICING MECHANISM FOR PETROL AND
DIESEL14
3 PROFILE OF THE ORGANISATION
BHARAT PETROLIUM 16
4 ANALYSIS OF DATA 24
5 CONCLUSION 34
6 APPENDICES
QUESTIONNAIRE 36
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BIBLIOGRAPHY 39
EXECUTIVE SUMMARY
The project title was “A Study Of Important Issues In Allied Petro Retailing In India At Selected Bpcl Petrol
Pumps”The research work was divided into two phases for reporting & analyzing the factors respectively.
Each phase is being described as follows was the starting point of research work & its duration was about 2
weeks. Before going out for primary research work, I studied the CNG lube oil industry with the help of
internet & collected some useful insight about the industry. In the primary research work, I first of all
decided on the different category of persons (stakeholders) who are linked with the engine oil. These
persons/stakeholders were as follows:-
1) Auto Drivers
2) Taxi Owners
3) Shopkeepers selling engine oil
4) Mechanic Personnel
Then I had carried an exploratory survey for each stakeholder without drawing any questionnaire. This
random sample helps me to understand the various factors affecting the buying decision of engine oil. But
the information which I get was quite raw & hence I moved on to the second phase for a systematic review
of the enlisted factors gathered from the exploratory survey. After understanding the enlisted factors, I
formed the questionnaire, covering each & every aspect about buying behavior of engine oil. I form different
questionnaire for all stake holders from the point of view of that segment of people. The sample data
collection from all the stakeholders had taken duration of around 5 weeks. In the first week I covered the
auto rickshaws drivers. I had taken a sample of 150 auto drivers from all the major part of Delhi. In the
second week I covered the survey of Taxi owners which constitutes a sample of 119 people. The third week
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was devoted to cover the shopkeepers. In the fourth weak I covered the mechanic personnel. I also covered a
survey on the social & economic demographics of the life style of drivers. From this survey I try to figure out
the relationship between the buying behavior of drivers & their educational & economic background. This
survey was covered in the fifth week. The remaining days of my research work were used to draft out the
studied factors on the word file & give it the shape of a project report. The overall expenditure from the
starting day of research & upto the end day of submission of report was in between Rs 4000-4500.
RESEARCH OBJECTIVES
To understand the various challenges faced by OMC in the application of the concept of Allied Petro
Retailing.
To identify the various segments of the consumers.
To identify various strategies of Allied Petro Retailing.
To list the different practices carried out by OMCs in order to promote co-marketing.
To understand the basic idea behind the practice of creation of a different brand identity by different
OMCs in respect to application of the Allied Petro Retailing concept.
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RESEARCH DESIGN AND METHODOLOGY
The formidable problem that follows the task of defining the research problem is the preparation of the
design of the research project, popularly known as "research design".
Different research designs can be conveniently described if we categorize them as:
• Research design in case of exploratory research studies.
• Research design in case of descriptive and diagnostic research studies.
• Research design in case of hypothesis testing research studies.
Exploratory research studies are also termed as formulate research studies. The major emphasis in such
studies is on the discovery of ideas and insights. Descriptive research studies are those studies that are used
to describe the characteristics of a particular individual or group, whereas diagnostic research studies
determine the frequency with which something occurs.
Hypothesis testing research studies (generally known as experimental studies) are those where the researcher
tests the hypothesis of causal relationships between variables.
In our case the research has been designed keeping in mind the exploratory or formulate research studies.
Data Source
Primary source:-
• Primary data is not used for this study.
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Secondary source:-
• Magazine, Newspaper and Internet websites.
Sampling Plan:-
• Sampling is not required for this study.
Collection of Information
Since this study is a qualitative study and based on secondary source of information, data has been collected
from secondary source such as magazine, Newspaper, Internet websites and books.
Analyzing the Data
After the completion of data collection, the data was then assimilated into a word documents. Inferences
were drawn thereafter.
Presenting the Findings
The inferences were then summarized along with the insights during data collection Recommendations have
been given on the basis of the above steps.
Decision Making
The recommendations drawn after the findings could be best worked out by way of analysis.
Strategy Plan
Steps involved:
• Data collection
• Sampling
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• Analyzing the data
• Presenting the findings
• Conclusion
• References
INDUSTRY INTRODUCTION
Indian Petroleum Sector
To understand the Indian Petroleum Retail Sector we should have a look on Keynote Management of the
retail end is a key determining factor in the success of otherwise of any business. To gain a sustainable
advantage, a retailer needs to understand and satisfy both the apparent and the latent needs of the customer.
This principle holds true in petroleum retailing too. All our efforts in exploration and production, refining,
distribution and marketing and finally culminate at retail point after moving through a long complicated
supply chain. The downstream business is extremely intricate and of sustainable strategic importance to the
national economy. Oil products, especially transportation fuels, would continue to play a key role in the
national economic growth. This is what makes the retail business exciting and challenging. It demands
continuous efforts at improvement of product and services, higher customer satisfaction, and offers endless
opportunities to innovate.
The business environment in India has undergone a significant change in the past few years, and nowhere is
it as pronounced as in the petroleum sector. Increase in refining capacity has transformed India from a net
importer to a net exporter of petroleum products. Petroleum marketing has been decontrolled leading to entry
of new domestic and international players into the market. Government have provided operational freedom
to the government oil companies in a host of areas including determining their own market share, freedom to
prepare and implement their market plans , selection of dealers etc. We are also moving towards a market
determined pricing regime in letter and spirit. This liberalized scenario is making the sector intensely
competitive, and the oil companies, especially those in the public sector would need to adopt a more
customer focused approach to the retail end of their business.
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Besides providing the policy framework for a liberal, decontrolled petroleum sector, the Government is
conscious of the need to encourage a disciplined and responsible market. The Petroleum and Natural Gas
Regulatory Board Bill is a step in this direction. This Bill seeks to set up a regulatory board to regulate
refining, distribution and marketing of products with a view to protect the interests of the consumers and
promote fair competition among the entities, ministry of Petroleum & Natural Gas has also issued various
control orders and directions to check adulteration.
Some of the major challenges that need to be immediately and purposefully addressed can be summarized as
under:
a) Quality
b) Quantity
c) Price
d) Value added services
e) Building brand identity
f) Generating higher volumes
g) Reaching the subserviced areas
Above all, the oil companies can build a sustainable competitive advantage only if they are driven by a
customer centric approach and seek to continuously improve. While we see modernized, well illuminated
petrol pumps coming along the highways and major urban centers, these innovations by themselves may be
only cosmetic. The boom in consumerism has given rise to a mature and demanding customer. Our
companies too need to mature fast. Let us now take the challenges mentioned above, individually.
The customer, for whatever reasons, has little faith in the quality of product dispensed through our petrol
pumps. While his demands are high, his expectations remain low. Bereft of choice, he is satisfied as long as
he gets an unadulterated product. Our oil companies interpret quality to mean “no adulteration”. But as the
market evolves and competition grows, quality will be interpreted as the impact of the fuel on the efficiency
and performance of the automobile’s engine. Similarly, we are satisfied with an assurance of dispensing the
right quantity to the customer and publicize it as a unique selling proposition. The recent initiatives such as
“Pure for Sure”, “Q&Q check” and “Pure Bhi Poora Bhi” need to graduate beyond the promise of
unadulterated fuel dispensed in right amount. Such narrow and limited perception of a quality product and
service may not hold good in future when real competition sets in. Quantity and Quality would be the bare
minimum a customer would demand. The Government also proposes to hold the oil companies accountable
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for the high quality of product dispensed through their network. Retail sales of diesel account for 80 % of
total sales and in petrol this percentage is 98 %. The image of a company is mainly reflected through retail
outlets.
Price of petrol and diesel has so far not been a differentiating factor in the retail business. Even after the
dismantling of the Administered Mechanism, the price of products remains the same throughout the length
and breadth of the country. We all know that the cost of the product is a very important factor in consumer
choice.
With the entry of couple of private players, though still in a small way, a sort of price war has already started
in a few locations. If anything, this price war is going to become a reality in times to come when the new
entrants go in for a rapid expansion in an aggressive manner of their retail network.
They have already speeded up their efforts at commissioning new retail outlets in the past few months. For
the Government oil companies, it is imperative to undertake a concerted exercise at cutting down their costs
and improving efficiency to effectively counter this challenge. Leveraging information technology for supply
chain management, and monitoring the quality and quantity of product can go a long way to improve
efficiency and cut down the costs.
One of the more visible transformations in the retail business of auto fuels is the recognition by the oil
companies that non fuel activities could be an important source of revenue at their retail outlets. So we have
convenience stores, fast food centers and other such amenities finding a place at petrol stations. This is a very
welcome change. However, the possibilities are immense and efforts in this direction too slow and limited.
Why don’t we view the retail outlet not merely as a point for selling petrol and diesel, but also as a prime
commercial real estate in our control? Further, this is a location that is easily accessible to both the motorist
and pedestrian. The retail outlets have potential to become a one stop shop for meeting innumerable needs of
the customers on one hand, and increasing the revenues of the outlet on the other. A statutory framework has
also been provided in respect of petrol pumps to be located on national highways. The guidelines issued by
the Ministry of Road Transport and Highways stipulate that the petrol stations should be a composite rest
area for the highway users and provide all the products and services that a highway user may require under
one roof. But a statutory framework can only be lay down the minimum requirements; it is for the business
entities to explore the other possibilities that are on offer. These could range from convenient stores,
restaurants, cyber cafés etc. for the car users to dhabas, dormitories, laundry services etc for the truckers.
These are mere illustrations.
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The product that goes in the fuel tank of the automobile is the same, irrespective of the company that owns
the petrol stations. So how does one build a unique brand identity, which goes beyond a single petrol station
giving value added non fuel services? A small step in his direction has been taken with the introduction of
premium fuels. The integrity of these fuels needs to be established and preserved, and their share in the total
sale needs to be increased. The sale of premium fuels in our country is 1 to 3% only, whereas in countries
like USA it is as high as 35 to 50 %. Maybe, we could also experiment with an intermediate grade of fuel
between the regular and premium brands. This would provide greater choice to the customers, and could be
an effective strategy to command customer loyalty.
These initiatives have to be blended with a strong concern for the environment as also energy security.
Greater investment in the available alternative fuels such as CNG, Ethanol blended petrol and auto LPG is a
desirable course of action to pursue, both for addressing social concerns and expanding the reach of the oil
companies.
We also need to keep pace with the advanced world in our efforts to discover other alternative sources such
as Bio- diesel, hydrogen etc. We expect a more proactive approach from our companies in this direction.
A good petrol pump that aims to provide comfortable and convenient service to the customers requires as
high an investment as Rs. 50 to 75 lakhs. Depending upon the location and the number and quality of
services, the investment levels could go up to Rs. 1.5 crores. However, the per pump throughput has been
declining and hovers around 160 – 180 KL/month. The profitability, may even the sustainability, of the retail
business at such high investment and low volumes needs to be addressed. Paradoxically, even in such a
scenario, the oil companies have launched a very ambitious, and at times reckless, programme of network
expansion. Obviously the assessment of the market growth made by the oil companies indicates high
potential in future. However, my view is that companies should target to generate higher volumes per retail
outlet rather than concentrating only on increasing the numbers.
This would give them better returns on their investments. And simultaneously, a different business and
investment model is required to be developed for low volume petrol stations located in rural areas. My
understanding is that the rural agricultural market has a large untapped potential for diesel sales, and the oil
companies should make efforts to develop these markets. It is not a correct position that social obligations of
the PSUs adversely affect their commercial interests. If non essential consumer goods like soft drinks and
cosmetics can penetrate the far flung rural markets, why can’t the essential mass consumption petroleum
products?
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This brings me to another neglected area of LPG and kerosene marketing. Since both are subsidized
products, there is a visible reluctance to expand in these areas. The reach of LPG is restricted to urban or
urbanized rural segments. As LPG has emerged as a major environment friendly cooking fuel, it is expected
that our oil companies, as responsible corporate entities would try to expand its reach. Similarly, the poor
man’s fuel, kerosene demands serious attention. While petrol pump dealerships are mushrooming, nearly
25000, we have only 6000 kerosene dealers in the entire country. Half the department blocks in the country
still do not have a kerosene storage facility or a dealership. And further, the oil companies have transferred
the responsibility of distribution to the State Government. This aberration needs to be addressed fore with.
The hydrocarbon sector is also witnessing the emergence of the Natural Gas market in India. It has now
moved from a more or less localized controlled business to a market determined activity. Natural Gas is
becoming the preferred fuel in several industries.
The Government has initiated many steps to increase its availability and subject the Gas market to
competitive forces.
Some of these important initiatives are increasing domestic gas production, import of LNG, transnational gas
pipelines, a Gas pipeline policy and Regulatory framework for Gas marketing and transportation. With the
onset of competition, this sector would also throw up the challenge of providing efficient and quality service
to the consumers. It is she who will define quality, be it product or a service. And oil companies can afford to
neglect the customer at only their own peril.
Marketing
On the marketing side, initiatives have been taken by the Government of India to improve the marketing
margins of the Oil Marketing Companies (OMCs) which earlier operated under a cost plus assured return
basis. All products have been decontrolled w.e.f. 1st April 2002 with subsidies on LPG and SKO continuing
on a specified flat rate basis and are to be borne by the Consolidated Fund of India. These will be phased out
in the next 3-5 years. Post APM, oil companies nearly doubled their combined net profit to Rs 232.54 billion
in 2002-03, the first year the petroleum sector was deregulated. The dismantling of APM had led to a rise in
the margins of the marketing companies, while upstream companies, like ONGC, are now being paid
international prices for their crude production. However, LPG & SKO are contributing negatively to the
earning is the market companies since the retail prices are fixed and the subsidies are far lower than the
actual outgo of the oil companies.
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Some of the other initiatives taken up by the GoI include :
Oil companies allowed selecting their own distributors/ dealers.
Deregulation of Import / Export of all petroleum products.
Awarding of marketing rights for transportation fuels to investors in exploration and refining.
Introduction of petrol blended with 5% ethanol in the country.
Current Profile of Marketing & Distribution
• Transportation fuels comprise 47% of the total demand of petroleum products.
• At present marketed by Indian Oil, Bharat Petroleum, Hindustan Petroleum, IBP, Reliance Petroleum, Essar oil
limited, Shell, ONGC.
• Parallel marketing of SKO & LPG allowed.
• Despite low prices of SKO/LPG due to heavy subsidy, reasonable market penetration by parallel marketers,
7% in LPG and 10% in SKO
• Free import and marketing of all other products allowed
• Level playing field for all players available
• Marketing of lubricants deregulated
• Regulatory body to monitor marketing of petroleum products to be in place
• Estimated investments in marketing sector up to 2025 : US$ 27.55 billion
The use of LPG as a transportation fuel has been in principle accorded and CNG is being currently used as an
auto fuel in some Indian cities.
Recent Trends in Petro Product Consumption
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The domestic market for petroleum products was depressed during July – September 2003. The overall
consumption growth was a negative 2.2% against 1.6% during the corresponding period of the previous year.
Diesel (which accounts for the largest share of refined product consumption at about 40%) consumption
witnessed a decline of 4.1%. Diesel consumption growth was under pressure despite a positive growth in the
GDP. The possible reasons for this unexpected trend were: rise in CNG consumption in the transportation
sector, substitution of diesel with natural gas in industries and, the possibility of kerosene adulteration in
diesel. A study by the petroleum Ministry Government showed that the slide was “locational” and not
“sector-specific”. Accordingly, the Government on November 28, 2003 decided to ban import of kerosene by
private companies in a move to curb adulteration of diesel. Under the new dispensation, kerosene can be
imported only through state trading companies – IOC, BPCL, HPC and IBP Ltd. Naphtha and Kerosene
consumption growth have also shown decline at -10.5% and 3.3% respectively. Products witnessing positive
demand growth include LPG (10.2%), ATF (6.0%) and MS (2.6%).
Key Success Factors and Outlook
While the Indian Downstream Refining & Marketing sector has been theoretically decontrolled, there are still
some areas where actual decontrol has not yet happened. For example, retail prices of automotive fuel arc still
fixed by the oil companies in consultation with the government and price competition has not happened.
Similarly, for LPG and SKO, the retail prices have been kept unchanged for quite some time and the subsidies have
now been slashed by l/3rd. Accordingly, during 2003-2004, the oil companies have accounted for subsidy receipt
on LPG and SKO @ 2/3rd of the amount claimed during 2002-2003, as per the government directives. This
has curtailed profitability growth. However in 2003-04, the other two major Oil PSUs (i.e. ONGC and GAIL)
were asked to share the subsidy burden of LPG and SKO. ONGC is reported to have been hit by a subsidy
burden of Rs 260 crore due to this.
While it has been so for the PSU players, the Government has decided to provide private companies subsidy on
LPG equivalent to that given to state retailing firms. Also, the Government is planning to allow sale of surplus
domestic LPG by private sector 'parallel marketing' companies.
The downstream refining and marketing sector otherwise offers immense growth opportunities for the
different players. In the refining segment, while the surplus situation in most products may not initiate interest in
greenfield projects, the current duty structure protects the Indian refining margins. Accordingly, new entrants
may show positive interest in taking the existing refining assets of the oil companies - whenever they are
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offered for privatisation. These refining assets may in turn mitigate the product sourcing risk &r the market
operations - where the bulk of the profit margins in the downstream segment lie. Accordingly the marketing
segment is expected to see ongoing initiatives by the oil companies. These initiatives are expected to be centered
around the interests of the consumers and may involve steps such as improving product range, refurbishing the
retail outlets, selling non-fuel items, providing value added services, etc.
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Pricing
By a gazette notification in November 1997, Government set a timetable for a phased transition
from an administered price regime to a market-determined system with continued subsidization
of PDS kerosene and LPG, but on a gradually reducing scale. Subsidies on kerosene and LPG for
household use were to be phased down over time to smaller price subsidies of 33.3 per cent and 15
per cent, respectively, by end-March 2002. As part of the energy sector reforms, the prices of many
petroleum products, for example, naphtha, furnace oil, low-sulphur heavy stock (LSHS), light
diesel oil (LDO) and bitumen, have been liberalized since April, 1998. One important
achievement was the linking of high speed diesel prices to international prices and an elimination
of subsidy since September 1997 for some time. However, LPG and kerosene, consumed mainly
by the domestic sector, continue to be heavily subsidized. The phased reduction in subsidies has
fallen behind schedule. In March 2002, Government decided that the subsidy on domestic LPG
and PDS kerosene would be provided on a specified flat-rate basis from the Consolidated Fund
from April 1, 2002. In this situation, Government reimburses the firms for the cost of the
subsidy, which is carried as a line item in the budget and called the petroleum subsidy.
Rising petroleum prices and subsidy burden
The unprecedented and steep rise in the international prices of crude and petroleum products has led
to an increase in the explicit subsidy bill in the Central Government's budget from Rs.5, 225 crores
in 2002-03 to Rs. 6,573 crores m 2003-04. Moreover, there were reports of under recoveries by
public sector oil marketing companies leading to demand for greater subsidies. Retail selling
prices of motor spirit and high speed diesel for the consumers are calculated by taking into
account:
(i) Basic price at refinery level on import parity basis,
(ii) Freight up to depots,
(iii) Marketing cost and margin,
(iv) State-specific irrecoverable levies,
(v) Excise duty
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(vi) Delivery charges from depot to retail pump outlet
(vii) Sales tax and other local levies, and
(viii) Dealers' commission.
The basic selling prices of motor spirit and high speed diesel are uniform at all refinery locations
throughout the country. As per the existing arrangement between the oil marketing companies
and refineries, the element at (i) is revised on a fortnightly basis in line with movements in
international prices. The marketing costs and margins, dealers' commission and delivery charges
within free delivery zones are also uniform. The prices at various locations vary depending upon the
distance from the refinery, rate of sales tax and other local levies. Although the oil marketing
companies were granted freedom to fix retail selling prices of motor spirit and high speed diesel
on a fortnightly basis, in practice, this arrangement has not appeared to have worked in quite a
transparent manner. For example, there was no revision of motor spirit and high speed diesel
prices between January 1, 2004 and June 16, 2004, while the prices of crude and petroleum
products in international markets increased rapidly. In order to mitigate the hardship of oil
companies, Government worked out a new methodology with effect from August 1 2004 allowing
the oil marketing company's limited freedom to revise the prices of motor spirit and high speed
diesel within a price band. Oil companies are permitted to adjust prices on their own within a
band of ± 10 per cent of the mean of rolling average import-parity price including cost of freight
of the previous 12 months and last quarter. When prices move beyond this band, the oil
marketing companies have to approach the government to modulate the excise duty rates.
Dismantling of APM, De-regulation of Petrol and Diesel in 2002 and Experience thereafter:
Scheme of Presentation
• Examine the post de-regulated business environment with respect to Petrol and Diesel with
particular reference to pricing.
• Current Pricing Mechanism for Petrol and Diesel
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The Experience on de-regulation of Petrol and Diesel
• APM was dismantled in April, 2002.
• Pricing of Petrol and Diesel de-regulated.
• Industry proposed Import Parity Pricing.
• Inland prices would have included freight from ports.
• Pricing implemented based on freight-equalization.
• Prices in coastal markets higher than DPP.
• Inland prices lower.
• Refineries compensation synchronized with international prices, every fortnight
• Consumer prices lagged behind in Fiscal 2002
• EXIM amendment in 2003.
• Private refineries and new entrants allowed marketing rights of automobile fuels.
• Offer lower prices in coastal markets.
• Flexibility was only in consumer pricing
• Proposal for implementation of IPP.
Current Pricing Mechanism for Petrol and Diesel
• Vulnerabilities in international prices of crude and finished petroleum products.
• Need to modulate impact on domestic consumer.
• Autonomous adjustment of Retail Selling Prices by Oil Marketing Companies within a
reasonable price band.
• Average C&F Price computed considering:
1) Rolling Average of C&F prices during previous quarter
2) Rolling Average of C&F prices during previous year
• Price Brand applying +/- 10% based on Average C&F as above
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Composition of Retail Selling Prices beyond C&F prices
1) Landed cost
a) C&F
b) Insurance
c) Customs Duty applicable for product
d) Bank Charges, Ocean Loss, Wharf ages
2) Ex Storage Point Price
a) Landed cost
b) Weighted average freight equalization factor
c) Stock loss and return on working capital
d) Marketing cost
e) Marketing margins
3) Retail selling prices
a) Freight from refinery to inland storage points
b) Excise Duty
c) Sales Tax
Issues related to Pricing Mechanism based on Price Brand
• Prices based on previous fortnight could be higher than upper ceiling on sustained basis.
• Results in Under Realization for OMCs
• Options are :
Modulation in Excise Duty Rates.
Flexibility within Price Brand.
Review of gross margins.
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PROFILE OF THE ORGANISATION
Vision
We are a leading energy company with global presence through sustained aggressive
growth and high profitability
We are the first choice of customers, always
We exploit profitability growth opportunity outside energy
We are the most environment friendly company
We are a great organization to work for
We are a learning organization
We are a model corporate entity with social responsibility
The Journey
Glorious Heritage
Early History - Dawn of a New Era
Do take some time off for a brief interlude with the past, as we
take you back in time to the evolution of Bharat Petroleum
Corporation Limited. A new chapter in the history of Indian industry.
Petroleum (derived from Latin Petra - rock and oleum - oil) first came up in wells drilled for salt.
People found it useful as illuminating oil and the demand for it steadily increased.
Samuel Kier, a Pittsburgh druggist, bottled and marketed Petroleum as medicinal cure. To
market a deodorised variant, he designed the first primitive refinery in 1852, which was a huge
improvised kettle, connected to a metal tank.
'Colonel' Edwin Drake and 'Uncle' Billy Smith drilled a well with the specific objective of
finding oil, and on 27th August 1859, they 'struck oil' at Titusvale, in North Western
Pennsylvania, USA, at a depth of 69.5 ft.
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From Nothing to Gold
The 1860s saw vast industrial development. A lot of petroleum refineries also came up.
An important player in the South Asian market then was the Burmah Oil Company. Though
incorporated in Scotland in 1886, the company grew out of the enterprises of the Rangoon Oil
Company, which had been formed in 1871 to refine crude oil produced from primitive hand dug
wells in Upper Burma.
The search for oil in India began in 1886, when Mr. Goodenough of McKillop Stewart Company
drilled a well near Jaypore in upper Assam and struck oil. In 1889, the Assam Railway and
Trading Company (ARTC) struck oil at Digboi marking the beginning of oil production in India.
While discoveries were made and industries expanded, John D Rockefeller together with his
business associates acquired control over numerous refineries and pipelines to later form the
giant Standard Oil Trust. The largest rivals of Standard Oil - Royal Dutch, Shell, Rothschilds -
came together to form a single organisation: Asiatic Petroleum to market petroleum products in
South Asia.
In 1928, Asiatic Petroleum (India) joined hands with Burmah Oil Company - an active producer,
refiner and distributor of petroleum products, particularly in Indian and Burmese markets. This
alliance led to the formation of Burmah-Shell Oil Storage and Distributing Company of India
Limited.
The Pioneering Spirit - Burmah Shell Marketing
A pioneer in more ways than one, Burmah Shell began its operations with import and marketing
of Kerosene. This was imported in bulk and transported in 4 gallon and 1 gallon tins through rail,
road and country craft all over India.
The company took up the challenge of reaching out to the people even in the remote villages to
ensure every home had its supply of kerosene. The development and promotion of efficient
Page | 23
kerosene-burning appliances for lighting and cooking was an important part of kerosene selling
activity.
With motor cars, came canned Petrol, followed by service stations. In the 1930s, retail sales
points were built with driveways set back from the road; service stations began to appear and
became accepted as a part of road development. After the war Burmah Shell established efficient
and up-to-date service and filling stations to give the customers the highest possible standard of
service facilities.
On 15th October 1932, when civil aviation arrived in India, the company had the honour of
fuelling J.R.D. Tata's historic solo flight in a single engined de Havillian Puss Moth from
Karachi to Bombay (Juhu) via Ahmedabad. Thirty years later, i.e. in 1962, Burmah Shell again
had the privilege to fuel JRD Tata's re-enactment of the original flight. Burmah Shell also fuelled
flying boats, which carried airmail at slightly higher rates than sea transport, at several locations.
As a true pioneer would, the company introduced LPG as a cooking fuel to the Indian home in
the mid-1950s. And all along, it went beyond selling petroleum, to educate the customer. Besides
selling Bitumen, the company pioneered desert road construction, training road engineers. It
provided free technical services to industrial customers - big and small - and it became a part of
the company's culture.
On Stream - The Burmah Shell Refinery
An agreement to build a modern refinery at Trombay, Bombay was signed between the Burmah
Shell group of companies and the Government of India on 15th December 1951.
Burmah Shell Refineries Limited was incorporated as a private limited company under the
Indian Companies Act on 3rd November 1952, and work began on the marshland of Trombay at
Bombay. Man and machine worked relentlessly, and soon the swamps gave way to towers and
tanks of steel, and miles of pipeline.
The refinery on 454 acres of land at village Mahul went on-stream on 30th January 1955, one
year ahead of schedule. Dr. S. Radakrishnan, Vice President of India, declared the 2.2 MMTPA
Page | 24
(Million Metric Tonnes Per Annum) Refinery open on 17th March 1955. It was then the largest
refinery in India then.
With this infrastructure, free India moved one step closer to self-reliance.
From Burmah Shell to Bharat Petroleum
On 24th January 1976, the Burmah Shell Group of Companies was taken over by the
Government of India to form Bharat Refineries Limited. On 1st August 1977, it was renamed
Bharat Petroleum Corporation Limited. It was also the first refinery to process newly found
indigenous crude (Bombay High), in the country.
Shaping the Future
The core strength of Bharat Petroleum Corporation Limited has always been the ardent pursuit of
qualitative excellence for maximisation of customer satisfaction. Thus Bharat Petroleum, the
erstwhile Burmah Shell, has today become one of the most formidable names in the petroleum
industry.
Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents to
aircraft fuel and speciality lubricants and markets them through its wide network of Petrol
Stations, Kerosene Dealers, LPG Distributors, Lube Shoppes, besides supplying fuel directly to
hundreds of industries, and several international and domestic airlines.
Dynamic Growth Post Nationalisation
Following Nationalisation in 1976, Bharat Petroleum changed gears and embarked upon a rapid
growth path. Turnover, profitability and financial reserves grew by leaps and bounds. Massive
expansion and modernisation provided a tremendous boost to the company's performance.
Large-scale recruitment and training became critically important to meet the demands of
expansion.
Page | 25
The Winds of Change - A Transformed Organisation Emerges
Opening up of the Indian economy in the nineties brought with it more competition and
challenges, kindled by the phased dismantling of the Administered Pricing Mechanism (APM)
and emergence of additional capacities in the region in refining and marketing.
In 1996, Bharat Petroleum went through a process of visioning, involving people at all levels,
which evolved a shared vision and a set of shared values. Based on this, the company
restructured itself, in a proactive move to adapt to the emerging competitive scenario. The
function-based structure was carefully dismantled and replaced with a process-based one. This
made the company more responsive to its customer needs.
Bharat Petroleum realises that, in the long run, success can only come with a total reorientation
and change in approach with the customer as the focal point. Today, Bharat Petroleum is
restructured into a Corporate Centre, Strategic Business Units (SBUs) and Shared Services and
Entities. The organisational design comprising of five customers facing SBUs, viz. Aviation,
Industrial and Commercial, LPG, Lubricants and Retail and one asset based SBU, viz. Refinery,
is based on the philosophy of greater customer focus.
The Planned Approach
Increasing globalisation, new products and services, and innovative marketing have resulted in a
very market savvy consumer. The production-based success philosophy of marketers has now
been replaced by a customer-oriented philosophy. Bharat Petroleum has taken cognisance of this
situation well in time and has been taking radical steps to keep itself attuned to the changing
times, realising that the future belongs to those who listen and adapt to their customers.
Strategy Development
Bharat Petroleum recognises that all strategic initiatives must conform to the overall vision ofthe
Corporation and improvethe economic value. The Strategy Development effort at the corporate
level achieves better focus in the new organisational structure, besides facilitating the SBUs in
developing their respective strategies that lead to an integrated Corporate Strategy. A Business
Page | 26
Planning process has been put in place that not only provides opportunities for the SBUs to
pursue their visionary goals in consonance with the Corporate Vision, but also continuously
monitors trends and identifies strategic opportunities for the Corporation.
Brand Management
In the highly competitive scenario, it has become imperative to own dominant brands. The Brand
Management team at Bharat Petroleum endeavours to build and manage a strong brand image
reflecting Bharat Petroleum's core values of being 'INCARE', viz. INnovative, CAring and
REliable. Emphasis is laid on continuously understanding customer behaviour, tracking their
changing needs and expectations, and meeting these needs in the most cost-effective manner.
Research and Development
Research and development CentreAlways on the forefront to innovate, Bharat Petroleum is
making distinct efforts towards Research and Development (R and D). Besides the R and D
facilities at the Refinery and the Product Application Development Centre in Sewree in Mumbai,
a new state-of-the-art RandD Centre is being set up near Delhi. The R and D Centre is being
organised around three core groups - Process and Technology Development, Product Application
Development and Environmental Engineering. A total outlay of Rs.3,000 million has been
planned to be spent in three phases up to the year 2003-04 on
this project.
Technological Edge
Bharat Petroleum has always been on the forefront of
harnessing technology initiatives for BPCL has been on forefront in harnessing technology.
maximising efficiency and achieving greater customer satisfaction.
Bharat Petroleum is the first Public Sector Oil Company to implement Enterprisewide Resource
Planning (ERP) solutions - SAP. The implementation project known as ENTRANS
(Enterprisewide Transformation) has been awarded the 'SAP Star Implementation Award', with
Bharat Petroleum having the distinction of executing the largest and the most ambitious SAP
Page | 27
project in India. The challenge of SAP implementation was to ensure that all the integrated
elements (of the complex multi-modular integrated solutions that impact the entire workflow of
the organisation) work seamlessly across the length and breadth of the country, including the
remote locations. Providing online connectivity in these remote locations, given the full-fledged
IT network infrastructure, was in itself a daunting task.
Bharat Petroleum is reaping the benefits of the integrated system in many areas of its operations.
The early gains of implementation are in the areas of tracking customer-receivables, monitoring
credit-management, inventory management, besides easing the operations in a large number of
areas.
Furthermore, Bharat Petroleum has also set up one of the biggest 'Centres of Excellence' in Asia
to provide online support to the end users and also work towards continuous improvement in
business processes and handle product upgrades and new generation products.
With SAP as the IT backbone, Bharat Petroleum plans to take advantage of the Internet based
capabilities along the entire value chain with a Customer Relationship Management solution. A
large data warehouse project has also been implemented, which facilitates access to real-time
accurate information on key performance indicators at all Bharat Petroleum locations. This
enables the management to take strategic and business decisions, thus ensuring value-added
services, better customer satisfaction and enhanced shareholder value.
People Above Oil
Over the years, Bharat Petroleum continues to meet the challenges of the rapidly changing
environment, leading to changes in the marketing of products and services. In all these changes,
only one factor has remained constant and has been the source of Bharat Petroleum's strength
and inspiration for any future innovations - Bharat Petroleum's People. The feeling of ownership
has facilitated all employees to understand the complexity of the market and needs of the
customers, and respond to these needs with innovative initiatives and offerings.
Page | 28
For Bharat Petroleum, commitment of its employees is a critical resource. Fully realising that
only a happy employee will put his best foot forward with the customers, Bharat Petroleum has
taken many steps to make the organisation a great place to work. In a survey conducted by
Hewitt Associates for the January 2001 issue of Business Today magazine to identify the best
employers, Bharat Petroleum was ranked among the top ten employers in India. The objective of
the study was to find out which companies had really charged the emotional and intellectual
energy of their employees. The other companies who were selected were Infosys, Hewlett-
Packard, P and G, ICICI, Hughes, LG, HLL, Compaq and Asian Paints.
Bharat Petroleum fosters effective value-based HR processes for development of people and
their organisational capabilities with a view to provide them with a competitive edge and also to
realise their personal vision in tandem with the corporate vision. The thrust areas include:
Performance Management which links business goals with individual performance goals
Recognising competencies and capabilities of the staff through Competency Modelling to
help identify and place the right person in the right job
Identifying competency gaps and bridging such gaps through appropriate training and
developmental programmes
Multi-skilling to encourage employees to take up new initiatives in the areas of Enhanced
Fuel Proposition, Add-on Stores, One Stop Truck Shops, Grocery and Fast Food Stores.
Bharat Petroleum has been conferred the National HRD Award - 2000 by National HRD
Network for making Outstanding Contribution to HRD.
At the National Petroleum Management Programme (NPMP) on Excellence in Creativity and
Innovation (1999-2000), Bharat Petroleum employees bagged all the three awards in the
individual category, along with four certificates of recognition in the team category.
Page | 29
ANALYSIS OF DATA
Q1. How Frequently Do U Refill Your Vehicle?
a) Twice In A Week
b) Weekly
c) Fortnight
d) Monthly
Twice In A Week Weekly Fortnight Monthly0
5
10
15
20
25
30
35
Illustration:
According To Survey Mostly Customer Said, I Have Refueling The Vehicle forenight Then
Customer Said That They refill vehicle Weekly
Page | 30
Q2. How Frequent Do You Visit BPCL Retail Outlet in a month?
a) 1-2
b) 2-5
c) 5-10
d) More than 10
1-2 2-5 5-10 More than 100
5
10
15
20
25
30
Illustration:
According To Survey Mostly Customer Said Yeah, he visit 1-2 months. Then Customer Said
That They visit 2-5 month.
Page | 31
Q3. Are YOU Aware of Bpcl(In & Out)?
a) Definately, Yes and I often visit the store.
b) Yes, but I hardly visit it.
c) Yeah,I have seen it from outside while refueling my vehicle.
d) Just heard of it from someone
e) No
0
10
20
30
Illustration:
According To Survey Mostly Customer Said Yeah, I Have Seen It From Outside While
Refueling The Vehicle Then Customer Said That They Aware Of BPCL(IN & OUT) But Hardly
Visit It.
Page | 32
Q4. Do You Feel That Because Of In And Out You Visit BPCL?
a) Highy Agree
b) Agree
c) Neither Agree Nor Disagree
d) Disagree
e) Higly Disagree
Highy Agree Agree Neither Agree Nor Disagree
Disagree Higly Disagree
0
5
10
15
20
25
30
35
Illustration:
According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said That
They neither agree nor disagree .
Page | 33
Q5. Paying A Visit To BPCL Stands Convienient For You Or Not?
a) Highy Agree
b) Agree
c) Neither Agree Nor Disagree
d) Disagree
e) Higly Disagree
Highy Agree Agree Neither Agree Nor Disagree
Disagree Higly Disagree 0
5
10
15
20
25
30
35
Illustration:
According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said That
They neither agree nor disagree .
Page | 34
Q6. What Are The Things You Generally Transact With At A BPCL(In And Out)Store?
a) Grocery
b) A.T.M
c) Bookstore
d) Air check
25
25
12
13
Grocery A.T.M Bookstore Aircheck
Illustration:
According To Survey Most Of The People Said That They Transact Mainly A.T.M And Air
check At BPCL(IN & OUT) Petrol Pumps.
Page | 35
Q7. Paying A Visit To BPCL(In And Out)Store Stands Convienient For You Because Of:
a) Grocery
b) A.T.M
c) Toilets
d) Bookstore
e) Aircheck
f) General Store
Grocery A.T.M Toilets Bookstore Aircheck General Store
0
5
10
15
20
25
30
Illustration:
According To Survey Mostly People Said That A.T.M’s ,Air check And Toilets Stand For
Convenient At BPCL(IN & OUT)(In & Out) Stores
Page | 36
Q8. Prices Of BPCL Stores Are Competitive Or Less Than That Of Other Stores?
a) Highly Agree
b) Agree
c) Neither Agree Nor Disagree
d) Disagree
e) Highly Disagree
Highy Agree Agree Neither Agree Nor Disagree
Disagree Higly Disagree 0
5
10
15
20
25
30
35
40
45
Illustration:
According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said That
They highly disagree.
Page | 37
Q9.Are You Satisfied With BPCL(In And Out) Stores?
a) Highy Agree
b) Agree
c) Neither Agree Nor Disagree
d) Disagree
e) Higly Disagree
25%
20%
30%
12%
13%
Highy Agree Agree Neither Agree Nor Disagree Disagree Higly Disagree
Illustration:
According To Survey Mostly Customer Said Yeah, neither agree nor disagree .
. Then Customer Said That They Highly Agree.
Page | 38
Q10 .what services you expect from in & out store?
a) Grocery
b) A.T.M
c) Toilets
d) Bookstore
e) Air check
f) General Store
Grocery A.T.M Toilets Bookstore Aircheck General Store
0
5
10
15
20
25
30
35
Illustration:
According To Survey Most Of The People Said That A.T.M’s , General Stores , Toilets & Air
check Are The Services What They Expect From In & Out Stores.
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CONCLUSION
With the deregulation of the petroleum sector and the change in the retail scenario of the petro
business. This liberalised scenario has madding the sector intensely competitive and the oil
companies, especially those in the public sector would need to adopt a more customer-focused
approach to the retail end of their business. Number of retail outlets is increasing rapidly because of
that throughput per retail outlets came down up to 160 KL from 180 KL Margin of companies are
shrinking and on the other hand pricing of petroleum product is still in government's hand.
Oil companies are competing with each other to reinvent themselves and capture the biggest
market share. To achieve this, efforts would be required to gain a competitive edge and to
increase volume off lake, by enhancing scale of operations, upgrading retail outlets and finding
new business opportunities
Allied Petro retailing has been adopted by all oil companies as a tool to generate more revenue as
well as allure the customer to avail the bunch of facilities under one roof.
Importance of Allied Petro-Retailing increasing going up in present scenario because of
following;-
Benefits to the Customer:
• More than one requirement at one place.
• Time saving.
• Money saving because of less transportation.
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Benefits to the company:
• Better utilization of fixed assets.
• New source of revenue generation.
• New tool for differentiation.
• Benefiting from positive rub off.
• Attracting more customers.
• Giving opportunity making long term relationship.
Area of Operation
Present:
• National highway, State highway, State Capital and some good town.
• In rural India, still in nascent stage.
Future:
• Rural India as well as small town are better prospect for expansion of Allied Petro-
Retailing Facilities at retail outlets.
Page | 41
QUESTIONNAIRE ON BPCL (IN & OUT)
Q1. How Frequently Do U Refill Your Vehicle?
e) Twice In A Week
f) Weekly
g) Fortnight
h) Monthly
Q2. How Frequent Do You Visit BPCL Retail Outlet in a month?
e) 1-2
f) 2-5
g) 5-10
h) More than 10
Q3. Are YOU Aware of Bpcl(In & Out)?
f) Definitely, Yes and I often visit the store.
g) Yes, but I hardly visit it.
h) Yeah,I have seen it from outside while refueling my vehicle.
i) Just heard of it from someone
j) No
Q4. Do You Feel That Because Of In And Out You Visit BPCL?
f) Highly Agree
g) Agree
h) Neither Agree Nor Disagree
i) Disagree
j) Highly Disagree
Page | 42
Q5. Paying A Visit To BPCL Stands Convenient For You Or Not?
f) Highly Agree
g) Agree
h) Neither Agree Nor Disagree
i) Disagree
j) Highly Disagree
Q6. What Are The Things You Generally Transact With At A BPCL(In And Out)Store?
e) Grocery
f) A.T.M
g) Bookstore
h) Air check
Q7. Paying A Visit To BPCL(In And Out)Store Stands Convenient For You Because Of:
g) Grocery
h) A.T.M
i) Toilets
j) Bookstore
k) Air check
l) General Store
Q8. Prices Of BPCL Stores Are Competitive Or Less Than That Of Other Stores?
f) Highly Agree
g) Agree
h) Neither Agree Nor Disagree
i) Disagree
j) Highly Disagree
Q9.Are You Satisfied With BPCL(In And Out) Stores?
Page | 43
f) Highly Agree
g) Agree
h) Neither Agree Nor Disagree
i) Disagree
j) Highly Disagree
Q10 .what services you expect from in & out store?
g) Grocery
h) A.T.M
i) Toilets
j) Bookstore
k) Air check
l) General Store
Page | 44
BIBLIOGRAPHY
Reference Books:
Marketing Management - Philip Kotler
Basic of Marketing - Dr. P. C. Pardeshi
Selling - Cynthia L. Greene
Reference Links:
www.bharatpetroleum.com
www.hindustanpetroleum.com
www.shellindia.com,
Business World – issue dated February 15th, 2005. Petroleum Retail Stuck in Pipeline.
The Hindu Business Line Reliance , Essar changing the rules of fuel retailing, Tuesday,
July 20, 2004, Archana Chaudhary.
The Hindu Business Line Strategy Report – Indian Oil & Gas Industry 2004, Chemtech,
December 31, 2003.
TERI, Background paper issues in the deregulation of the Oil & Gas sector, New Delhi,
R.K.Narang, Ardhendu Sen and Leena Srivastava.
Page | 45