Essar Oil looks to double petrol pumps in 18 months

New Delhi: Essar Oil, India's second largest private oil refiner, plans to nearly double its petrol pumps to 4,300 in next 18 months, a senior company executive said.

“We have 2,225 petrol pumps now which we will increase to 4,300 in next 18 months," Essar Oil's CEO Retail Madhur Taneja said. The retail network expansion planned is on franchise model and will entail an investment of about Rs 2,500 crore by the pump owners.

“We were the first private company to enter fuel retailing business when we in 2003 opened our first petrol station," he said.

The network was expanded to 1,400 outlets before the expansion was frozen in 2008-09 in view of private retailers being unable to compete with heavily subsidised public sector oil firms.

After diesel price was deregulated or freed from government control in October 2014, the expansion was restarted and network has reached 2,225 now, he said.

“We saw sales volume increase from 700,000 kilolitres in 2014-15 to 1.67 million kl in 2015-16 and we hope to continue to grow at over 100 per cent this year as well against an industry growth of 7-7.5 per cent," he said.

Essar Oil has a pan-India network now except for Jammu and Kashmir and the North East, he said.

Its first petrol pump came up in Maharashtra about 13 years ago in 2003. Essar Oil was the first private company to enter petro product retailing in India at a time when the government was experimenting with the idea of deregulated oil pricing by freeing up the price of ATF.

After a brief spell of deregulated product pricing, the diesel market was again regulated in 2004. The move posed challenges for private oil companies like Essar.

Through the course of this regulation regime, Essar Oil, in a bid to keep its retail ambitions alive, provided financial support to its franchisees through various schemes, thus helping them in tiding over the difficult times, he said.

This earned the company the dealers' trust. In October 2014 when diesel prices were completely deregulated and private retailers were given a level playing field with their PSU counterparts, the company already had a network of about 1,400 retail outlets.

Over the last two years, Essar Oil has been on a ramp-up drive to create a larger retail footprint across the length and breadth of the country. Many outlets in its existing network were revived and work began on launching new Essar Oil pumps.

Essar Oil's franchisee model entails giving the petrol pump operator a land lease rental for the land he brings for setting up the outlet. Also, he is paid an pre-agreed return on the investment made in setting up the outlet as well as commission on petrol and diesel sold, he said.