Foreseeing enhanced competition from private fuel retailers in aftermath of petrol prices decontrol, state-run

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Indian Oil Corporation Limited (IOC), will adopt a vertical growth plan to expand its retail network. This will be part of its plan to maintain market leadership position in fuel retailing segment.

IOC will now focus more on rural and semi-urban India. It plans to add 700-800 new fuel outlets to its existing network of nearly 19,000 stations in a year’s time from now.

“We are no more looking at numbers (of retail stations). We are focusing on volume growth,” said a senior IOC official at the company’s Mumbai marketing office.

IOC plans to take ‘rural path’ as adopted by players in telecommunication, consumer durables and automakers among others. “Private players will come out with their outlets mostly on highways and urban areas. We already have large network inside the cities. So, we will focus on ‘Kisan Seva Kendra’ kind of outlets,” the official explained. In effect, we will set up low cost rural fuel retailing infrastructure and the viable format is being worked out, he explained.

IOC sold 8,507 thousand million tonnes (TMT) of diesel through its retail outlets in 2009-10, while petrol sales were 5,647 TMT. When asked how much will be the growth in sales after setting up new outlets, the official said, “It’s little early to figure that out. We will know the growth once the positioning of retail stations is determined.”

Kisan Seva Kendra (KSK) is a retail outlet model pioneered by IOC to cater to the needs of customers in the rural segment. At present, IOC operates over 2,700 KSK outlets.

KSK comes with non-fuel retail facilities such as convenience stores, which sells pesticides, vegetables, banking products and stationery items. IOC has tied up with Indo-Gulf for fertilisers, National Seeds Corporation for marketing seeds and agricultural inputs as well as alliances with Nabard, Oriental Bank of Commerce and Bank of Baroda for banking products. In addition, some KSKs have installed internet kiosks and communication facilities.

“Setting up of single KSK outlet may cost anything between Rs 8 lakhs and Rs 10 lakh because of low land and real estate cost. However, an outlet in a metro or tier-I city may go up to Rs 1 crore or more,” the official said.

Last month, Centre freed petrol prices from its control. Government will also make diesel prices market determined in the due course as announced by Prime Minister Manmohan Singh. This has also given new hope to private fuel retailers such as Reliance Industries Limited (RIL), Essar Oil and Shell India, who are expected to aggressively come up with more number of retail outlets.