In FY 2019, the Government of India earned INR 595,438 Cr (Central & State Governments combined) from sales of petrol and diesel, from 64,600+ fuel stations pan India at an average throughput of 160 klpm (kilo liter per month) per outlet. While slowing global economy and trade tensions have impacted the domestic market, reflected by the production cuts across the country’s car manufacturing industry, India however, continues to be the fastest growing energy market worldwide. With a growing middle class with disposable income, rapidly developing rural areas and at mere 22 cars per 1000 individuals, the country offers tremendous potential for car and passenger vehicle penetration, propelling sustained demand for transportation fuel and mobility solutions.
To capture this burgeoning market, the Public Sector Oil Marketing Companies (PSU OMCs), which account for 90% of the country’s retail fuel market share, has announced plans to set up a whopping 78,493 fuel stations, with 9000 outlets to be completed by 2020-21. India’s large untapped market, deregulated pricing for petrol & diesel, the recent loosening of regulations for the retail fuel sector and the improved ease of doing business has seen a string of foreign oil majors making a run for what is presumably the world’s third largest energy consuming market. The international oil giants, through JVs and strategic alliances with existing Indian players in this sector, have envisioned setting up 6000-8000 fuel stations by 2021.
Further, the Government of India’s privatization plans for BPCL, the second largest retail operator in the country with 15,402 petrol stations to its name and the lead operator on the highways, and sale of its 53.29% stakes in the state-owned enterprise, has opened one of the most significant & attractive opportunities for retail fuel operators vying to enter the lucrative Indian market. The opportunity, quite predictably, has been met with high interests from both regional players such as Reliance (Jio-BP), JVs and a plethora of foreign oil companies including Saudi Aramco, Kuwait Petroleum, ADNOC among others.
However, as regulations mandating limiting greenhouse gas emissions have strengthened worldwide and technology & innovations offering alternative solutions have gripped the market along with changing mobility preferences, the demand for fossil fuels is seeing an unprecedented dent, propelled by increasing shift to alternative solutions such as bio diesel, CNG & electric vehicles (EVs). The Ministry of Petroleum & Natural Gas, strongly advocating the development of a gas economy, has placed clean energy solutions at the top of its agenda and has announced setting up 10,000 CNG stations in India by 2030, with the PSU OMCs committing a combined investment of $1.5 billion to build bio-CNG plants across the country. Further, India is witnessing rapid penetration of EVs, fueled by the subsidies and incentives from the Government in its efforts to boost sustainable mobility. However the lack of sufficient EV infrastructure with only 500 EV charging stations spread across the various metropolitan cities is a major roadblock to the expected pace of growth.
As the sector witnesses tightening competition with increasing number of players envisaging explosive network expansion plans, alternative fuels & sustainable mobility solutions on the rise and with the transportation sector undergoing the biggest disruption in its history with ride-sharing services gaining significant market share and set to capture 20% of all road transportation by 2035, a good percentage of which will be electric Autonomous Vehicles (AVs), the pertinent questions become:
ABSA is a business intelligence organization serving oil & gas, infrastructure, finance and other core industry sectors in the Middle East & South Asia region. Through its international summits, ABSA has been instrumental in furthering the development of the retail fuel sector in the Middle East & Asia working alongside Petroleum Ministries and state-owned Operators.
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