BPCL, Indian Oil to revive premium petrol brands on excise cut

After a hiatus of nearly two years, branded petrol has again begun flowing in the retail market.

The reduction of central excise duty on branded petrol, from Rs 7.50 a litre to Rs 2.35 a litre, has not only made the product cheaper but helped the oil marketing companies to revive sales too.

The central excise duty cut, a long-standing demand of oil marketing companies, was honoured in the Union Budget in July, 2014.  

Branded fuel is regular fuel with additives that are supposed to enhance a vehicle's performance.

It is supposed to keep the machine clean internally, enabling lower spends on maintenance and an enhanced engine performance.  

"Consequent to the reduction of levies recently, we plan to make the petrol variant available across more retail outlets across the country.

We are positive about the sale of branded petrol doing well," says Bharat Petroleum Corporation Limited (BPCL). BPCL sells branded petrol under 'Speed'.  

IndianOil Corporation Limited (IOCL) says it is keen on reviving sales of branded petrol to previous levels.

IOCL's 600 retail outlets sell its XtraPremium branded petrol. The number of retail outlets selling branded fuel had gone up to over 4,000 in 2007-08.  

"We have plans to boost the sale of XtraPremium through more IndianOil retail outlets. The strategy for the same is being worked out," IOCL says.  

An IOCL official says the company would, in two weeks, launch ads at its retail outlets. "We may not go for television commercials but we would launch some creative advertisements through hoardings and billboards at our outlets."  

Hindustan Petroleum Corporation Limited did not reply to emailed questions.  

Specific audience

Oil marketing companies say they are targeting owners of premium four-wheelers and two-wheelers.  

The ratio of branded fuel to unbranded fuel sales (conversion rate) is negligible.

Branded fuel saw its heyday in 2007-08. The conversion rate in its peak in 2007 was 27 per cent of branded petrol and 11 per cent of branded diesel.  

The conversion rate of IOCL's XtraPremium is 0.46 per cent compared to 19 per cent in 2007-08.

The current conversion rate of XtraMile (branded diesel) is nil against 19 per cent in 2007-08.

The industry had sought a duty cut on branded diesel, too. In 2007, sales volume of branded petrol was 1,088 TKL and branded diesel 1,176 TKL. The volumes are not significant now.  

Price differential

For BPCL, the differential between petrol and branded petrol is between Rs 2.74 and 3.75 per litre and diesel and branded diesel between Rs 6.0 and 6.69 per litre. Margin on branded fuel for BPCL is between Rs 0.50 and 1.35 per litre.  

For IOCL, the price differential between XrtaPremium and regular petrol is Rs 2.50 in Delhi, Mumbai, Chennai and around Rs 3.50 in Kolkata.

The current price differential on XtraMile is Rs 4.74 per litre in Delhi and Rs 4.90 per litre in Chennai.  

This difference could come down once diesel is deregulated. The falling global crude oil prices coupled with phased increases in diesel price could lead to it before the year ends.  

Though, the government reduced the excise duty element on branded petrol to a great extent during the current budget of 2014-15, the additional duty element continues, resulting in additional value added tax.  

The central and state levies on branded petrol put together are between Rs 1.68 and Rs 1.87 across the four metros.