Oil Industry

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Determination of elements of customer satisfaction in delivering fuel through retail outlets on highways and in suburban areas

The Indian Petroleum Industry

The Indian petroleum Industry started way back in the end of the 19th century, with the discovery of petroleum in Digboi Assam .The industry was initially opened for international players and global oil majors such as Caltex, Esso and Burmah Shell. However after 1970s, the Indian division of the international companies was nationalized by government of India and the industry became strictly regulate din the country. The government nationalized the refining and marketing sectors and subsequently introduced regulatory controls on the production, import and distribution and pricing of crude oil and petroleum products by establishing the Oil coordination Committee (OCC)..

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Through the OCC, the government administered the prices of petroleum products after establishing a complex oil pool account system. Producers, refiners and marketers were compensated for operating cost and were also assured of a fair return on their assets through the Administered Price Mechanism (APM). During this period, government controlled entities accounted for 90% of the market share.

Major players like IOC, BPCL and HPCL dominated the market in the downstream sector, while the upstream sector was dominated by Oil and Natural Gas Corporation and Oil India claiming approximately 84% of the share of the total market. After the liberalization of the Indian economy, the industry witnessed some fundamental changes. The policy makers realized that APM will no longer be working successfully as it had in the past and the sector will have to be opened completely. Thus the government initiated the process of deregulation in 1995, whereas APM was replaced by Market Determined Price Mechanism (MDPM).With the introduction of MDMP and deregulation of the marketing and refining sectors, the industry was opened completely for private and foreign participation. The government allowed four companies Reliance Petroleum, ONGC, Essar and Numaligarh Refineries to market petroleum products through their retail outlets. During the APM regime, public sector companies ‘owned’ the market and hence they never felt the need to pay attention towards brand building and customer loyalty. Branding initiatives were limited to lubricant market only.

With the entry of these new players, competition intensified and posed a serious threat for the existing players. This lead to change in the way oil marketing companies looked at the fuel retail business. This was the time when all players started understanding the fact that fuel products has to be moved from commodity-convenience purchase behaviour to service-customer loyalty quadrant. This will initiate cross selling and thus leading to increase in per square feet revenue from retail space. This increased the players’ effort towards branding and Non Fuel Revenue initiatives.

Fuel Retailing in Indian Petroleum Industry

Fuel retail business in India has undergone a huge change from a fully regulated market to semi regulated market.

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