RIL, Essar respond to motor fuel retail discounts of OMCs

While RIL is offering flat discounts, Essar oil sticks to 0.75% discount on e-payments

Reliance Industries and Essar Oil, the two privately owned motor fuel retailers, are responding to the slump in sales due to demonetisation and the recent 0.75 per cent discount for cashless payment at public sector oil marketing companies (OMCs)-run outlets.

Reliance is offering a flat discount of Re 1 /litre, irrespective of the mode of payment. Essar is also giving a 0.75 per cent discount on digital/card payments.

"RIL's discount was started around two weeks earlier. Some market share was lost for a temporary period, as the public sector-run pumps were accepting the old Rs 500 and Rs 1,000 notes but the private ones were not allowed to," said a source, on condition of anonymity.

RIL had a retail network of about 1,400 outlets, defunct for quite a while; the company has restarted operations at a little more than 1,000 outlets. Essar has 3,000 outlets.

Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation Ltd are the three government OMCs. To incentivise digital payment methods, the government announced 0.75 per cent discounts on e-payments at public sector fuel outlets from December 13. "How long RIL will continue with these discounts will be decided by the market dynamics," said the person quoted earlier. The Essar spokesperson refused to comment.

India is currently one of the fastest growing markets in retail fuel. The government OMC outlets are considering whether to experiment with dynamic fuel pricing. RIL and Essar have not done this till now.

"RIL is an position to apply dynamic pricing, but it makes sense only if all players are practising it," said the person quoted earlier. The Essar spokesperson declined to comment. Dynamic pricing would mean a fuel retailer offering different prices at different outlets, depending on the proximity to infrastructure, demand and supply dynamics, and other factors.