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Retailing is defined as a business that sells products/services to consumers.

This definition includes the interface of retailers with both vendors and consumers
as well as other processes like supply chain management that impact retailers.

Retailing is the last link in the supply chain- The journey from well to wheel.

Retail is the face of the oil company.

Retail is selling a point at which the ownership of product gets transferred to
the Buyer.

Selling involves meeting customers need in the exchange of price.



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Petroleum products cant be seen, felt or examined unless special efforts are made.

Petro retailing works on trust- consumer believe that they are getting what they are
Buying. Its like gold- you cant check the purity yourself so you trust the goldsmith.


Indian Market US Market
Quality interpreted as no adulteration Quality interpreted as impact on fuel
efficiency and engine performance
Quality interpreted as getting the right
amount of fuel
Quality is not a parameter for
consideration
Price is not a differentiating factor always Price is a very important factor
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ROs
31,650 in 2006 - 40,819 in 2011.
IOCL Highest market share 46.7%.

LPG distribution
6,477 in 2001 - 9,686 in 2010 from.
IOCL Highest market share 53%.

SKO distribution
6547 in 2004 - 2010 is 6615
IOCL Highest market share 60%.

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IOCL has the widest network of ROs across India with 19,057 ROs as in January
2011.
IOCL is the market leader in the retail sector of petroleum products with 46.7
percent market share followed by HPCL.
Company
RO's
(2002)
RO's
(2010)
Market
Share (2010)
IOCL 11724 19057 46.69
BPCL 7332 8988 22.02
HPCL 7304 9785 23.97
IBP 3474 NA 0
RIL 1316 1429 3.5
Essar 443 1391 3.41
Shell NA 94 0.23
Others 48 75 0.18
Total 31641 40819 100
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Increasing Price of crude oil.

Government Regulating the price
I. Prices are not market determined
II. RSP has not moved in tandem with the international crude prices
III. Current loss for OMCs is approx. Rs.243 cr. per day (effective 16
th

sept-2011).

Absence of level playing field. PSUs are supported by issue of oil bonds
and Private Oil Companies are forced to sell at higher prices.
Current Retail Loss: (eff. 16-Sep-11)
Diesel Rs.6.05/ lt.
PDS Kerosene Rs.23.26 / lt.
Domestic LPG RS. 267/ Cylinder
Continued subsidy burden on LPG & SKO.

High incidence of duties and state taxes on transportation fuels. Number
of levies and their magnitude vary widely among states (E.g.: 26% VAT
on HSD in Maharashtra as compared to 13.28% in Delhi).
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Financial Viability.
Unplanned Proliferation of ROs
Volumes have only increased at an annual growth rate of about 5%
Result -- Average throughput per RO has declined substantially.
Lower ROI and delayed payback period for the stakeholders

Increasing cost of land and customer expectations in the urban areas
viability of ROs is severely affected due to fall in throughput.

Image of ROs is tarnished due to adulteration.

Providing physical evidence of quality fuel across the network.

Implementation of effective control mechanisms to prevent diversion of
subsidized products in the open market.




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Automation of Retail outlets Resistance from the existing channel network
due to the current trade practices.

Implementation of effective control mechanisms to prevent diversion of
subsidized products in the open market.

Building and Sustaining Customer Loyalty
No real product differentiator.
Capturing mind and wallet share through brand creation.

Developing a business model to accommodate the diverse lifestyles and
driving habits of Indian customers
Customer expects consumer centric facilities:
Car wash service
Food courts
Convenience Stores
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Provide level playing field to all players (PSUs as well as Private).

Governmental action in formulating a viable market related pricing policy.

Planned set up of ROs to justify long term viability - Planned Townships etc

Relaxation in statutory compliances - Single Window Clearance

oNo. of permits to be decreased
oMore economical


Rationalization of duties and taxes.
o Move towards GST regime (in line with the international experience).
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Planned set up of ROs to justify long term viability - Planned Townships etc.

Evaluate options for Retail Outlets as receiving and storage points instead of
only sales point - Warehousing facilities, Receipt points for NFRs etc.

Generate additional revenue and margin streams from Alternate Fuels:
oCNG, Auto-LPG
oBio-Fuel Ethanol blended Gasoline

Enhance Profitability by optimizing
oSales per available square footage
oProduct & Infrastructure Sharing between Private companies and PSUs
to economize logistics and S&D costs.



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Model based on franchising format- adopted by ESSAR OIL LIMITED (EOL)
Franchisee leases his land to EOL Earns lease rent
Franchisee makes investment in site and operates the retail outlet Earns
return on the normative cost.







Advantage to Stakeholders

Spreading of risks and returns
Scalable
Low cost and quick pay back Volume liked earnings.
Cost savings to carry out consumer promotion and franchisee incentive
programs
Franchisee brings local influence for business and channel development.
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EOL is now focusing on introducing Auto LPG & CNG pumps in its outlets
through tie-ups with Aegis Gas and GAIL Gas, respectively.

Two CNG stations have been commissioned in Surat and Ahmedabad, in
association with Sabarmati Gas & Gujarat State Petroleum Corporation.
Essar Oil has 1,635 retail outlets,1,381 operational and 254 in various stages of
construction (as of 11
th
April 2011).

Company increasing focus on non-fuel retailing at its outlets .

The Company is increasing non-fuel retailing activities in its current portfolio of
retail outlets to provide an additional source of revenue for its franchisees.

The company has forged alliances with alternative fuel and non-fuel retailers
(tie-ups with more than 20 brands) in segments like auto gas, auto components,
lubricants and services. EOL is also in talks with retailers in the food &
beverages, agro products, telecom and banking/finance segments to set up
points of sale at its outlets.
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In FY 2010-11, Essar Oil sold 7.19 MMT of diesel, petrol, LPG and kerosene
to Public Sector Oil Companies.

This is slightly lower than the 7.30 MMT of these products sold in FY 2009-10
to Public Sector Oil Companies, but this performance is commendable
because of the more intense competition from other private sector refiners in
the fiscal FY 2010-11.

In total Essar Oil sold 8.95 MMT of products - 64 per cent (by volume) or 68
per cent(by value) in the domestic market.

This has dropped from last years domestic sales of 9.55 MMT and reflects
the Companys considered strategy of exporting diesel during the low-demand
monsoon months. The dip in domestic sales is also because of diminished
demand for fuel oil in the Indian market because of natural gas availability
from the KGD-6 block.

Exports increased to 32 per cent in 2010-11 compared to 25 per cent in
2009-10
Sales performance
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