Petrol – a commodity for just the rich?

Petrol – a commodity for just the rich?

What could be a better time to observe and study the Petroleum Industry than now? With the price of petrol soaring as high as Rs. 77.53 per liter, there has been quite a commotion in the city.

The Indian government had decided in the year 2010 to let the gasoline and diesel prices to be market-determined as the federal government seeks to shrink its budget deficit and help state-run marketing companies cut losses on selling fuel products at state-set prices. As a result of this, the petrol prices have seen a steep price growth. Some of the observable effects of this are : 

           1. Rise in inflation

           2. Private sector oil companies will have an increase in their margin.

Given below is the trend in the petrol price changes over the past couple of years.

DATE	PRICE(Rs. Per Ltr)
Sep 09, 2010	57.44
Dec 16, 2010	60.65
Mar 02, 2011	61.93
Mar 15, 2011	67.22
Jul 01, 2011	67.50
Sep 16, 2011	70.82
Nov 04, 2011	72.73
Nov 16, 2011	70.38
Dec 01, 2011	69.55
May 24, 2012	77.53

                                               

The state governments benefit most out of the price hikes as the tax that they levy on the petrol price increases. The customers, however, are gravely affected due to the price hikes, but with petrol having become one of the most inevitable commodities in the present day, they are not able to do much but to complain.

I had visited one of the petrol bunks to better understand this situation.

About the Bunk

I had visited the Bharat Petroleum outlet at Kallikuppam near Ambattur. The bunk was set up in 2006 having paid an initial caution deposit of Rs.2 Laks to Bharat Petroleum. Other operational and maintenance expenses had to be taken care by the dealer himself. The bunk has installed a total of 6 stalls, each of them having 2 petrol and 2 diesel outlets. It has provisions for 3 types of petrol: Unleaded, Speed and Speed 97 and two types of diesel : Normal and high power. I had spoken to the supervisor Mr. Chakravarthy, who explained how the underground tank has a capacity of 15,000 ltrs and they have an average sales of about 4000 ltrs per day.

Source for the Bunk

Their main supply is from Mumbai. From Mumbai it is brought to the Chennai harbor via cargo ship and is then connected to Korukkupet in Chennai using Petroleum lines. Tanker lorries then periodically supply to this petrol bunk from Korukkupet. Korukkupet is the supplier for most of the BP outlets in Chennai.

Sales Pattern

Two wheelers formed major portion of their customer base and as the petrol bunk falls in the way to many engineering colleges in Redhills and Surapet, college buses also formed a bulk of their customers.

Three notable things he mentioned are given below:

·      

       1.  Speed petrol, Speed 97 petrol and high power diesel do not sell well owing to their higher prices. The effects of these products are felt only upon continuous usage over a period of time and customers are not usually patient to see the results and tend to question its validity.

·         2. There is a newly built Chennai Bypass Road that now routes all the heavy vehicles to Andhra Pradesh. Before this Bypass was built, the dealer’s sales were almost 8,000 litres, double the current volume of sales undertaken, as the heavy vehicles that used this road, frequented the pump.

·          3. The pump made only a meager marginal profit on the sale of its petrol and diesel. Most of the profits come from the sale of lubricants. These lubricants are however harder to sell. These lubricants are showcased in the inner office room of the bunk.

Observations

Although the petrol price hike has caused a portion of the population to look at alternative sources of transportation like the public bus and the electric trains, fuel consumption by majority of the population remains pretty non-staggered. With this confirmation, the pump can work on other aspects of improving its performance and sales.

Following are my observations:

·         1. Considering the fact that lubricants bring more marginal profit, they could be placed in a more prominent place, like near the petrol pump itself rather than inside the office room. Also the staff members could be trained to recommend these lubricants to the customers stating that it improves performance and efficiency. 

                                                   

·        2.  Also, since the petrol pump is located in a fairly rural setup, it can implement additional facilities like an ATM that may bring about attracting more customers. (The nearest ATM from the petrol pump is almost 1.5 kms away).

·         3. The employees could be trained to be customer centric, customer friendly and courteous. This I felt is lacking, owing mostly to the rural setup. But with Ambattur developing into one of the newer IT hubs and industrial estates, the petrol pump should also grow with its environment.