‘Time not right to cut petrol price’
New Delhi   06-Oct-2011


Mr. Makrand Nene, Director (Marketing), IndianOil

The sharp fall in crude prices over the last few days may have nixed another round of increase in petrol price and market leader IndianOil Corporation will watch the trend for “a reasonable” time before taking a call on paring the rate, says company’s director (marketing) Makrand Nene.

“Petrol is deregulated. But still we aren’t making anything (before the crude’s fall). We were looking at increasing prices...even now we are losing about 29 paise a litre. But I would say that we would watch the situation for a reasonable time before taking a call. We look at the situation in totality...how much burden consumers can take,” Nene told TOI after taking charge on Wednesday.

“You have to understand that refining petrol from crude is not a 1:1 ratio process. Petrol price cannot be looked at in isolation. There are other products that are discounted or imported at higher cost. You have to look at the average of all these for a factual position on overall pricing (total production cost and revenue). That’s why I will not hazard a guess on a reasonable time (to watch the situation),” he explained.

Nene said equipping IndianOil with infrastructure to maintain leadership position and volumes in a growing market, while carrying the burden of under-recoveries and borrowings, is the biggest challenge. “We are completely dependent on government support on controlled fuels. Our borrowings have reached a situation where banks may refuse to lend further. But we have to pass this phase. To my mind, therefore, the biggest challenge is to handle under-recoveries, maintain leadership and volumes,” he added.

Nene said he would focus on building customer confidence and nurture new markets. “We need to align our individual brilliance with organizational goals to deliver more and more value for customers,” he said.

Nene said IndianOil’s loss of market share, as indicated by industry data a few months ago, was due to “base effect”. “Traditionally, we have enjoyed competitive edge, especially in the north. In recent times, HPC and BPC have expanded in a big way. Earlier, they had a very low and we had a very high base. So the change showed as IndianOil losing market share, though it was not significant. But there is no complacency and our focus will be on marketing initiatives. to retain our position and volumes.”

Crude dropped to an average of $100 per barrel-level in the last few days from $111 a barrel last month essentially due to fears over Eurozone default and fresh cooling of the US economy. Product prices have, however, risen in recent times due to outages in refining capacity as several Asian refineries have taken maintenance shutdown.