New Delhi: The decontrol in the price of petrol and the subsequent rise in selling price of petrol and increase in diesel price by the government have made a positive impact on the finances of oil marketing companies and would ultimately drive down the fiscal deficit, Mr. Murli Deora, Union Minister for Petroleum and Natural Gas, said here today.

Inaugurating the Special Track on Fuel Retailing of PETROTECH 2010, organised by FICCI and Bharat Petroleum Corporation Ltd. (BPCL), Mr. Deora said that the under-recoveries from the sale of petrol, diesel, domestic LPG and kerosene amounted to a whopping Rs. 1.03 lakh crore in June 2008.

Petrol price decontrol and increase in the sale price of diesel have substantially reduced under-recoveries and failed to hamper the growth of the automobile industry. In fact sale of passenger cars and other vehicles have seen a quantum jump in the last six months. Speaking on the sidelines of the conference, Mr. Deora ruled out de-regulation of kerosene prices as kerosene was a fuel used by the poor and it was the government prime responsibility to ensure its availability at an affordable price.

Mr. Sudhir Bhargava, Additional Secretary, Ministry of Petroleum & Natural Gas, pointed out that in the post-deregulation scenario, the fuel retailers were faced with new challenges arising out of competitive pricing and lower margins. He urged the industry to focus on convenience and specific demands and preferences of the rural consumers and those in Tier II and Tier III cities.

He called upon the industry to direct resources to technology upgradation to set up multifacility fuel stations and appropriate use of non-fuel retail to maximize its profits.

Mr. S Radhakrishnan, Chairman & Managing Director, BPCL, stated that de-regulation called for building customer loyalty and brands. The oil industry, he added, would have to innovate and re-orient their business models to meet the needs of the discerning customers.

Mr. Y K Modi, Past President, FICCI & Chairman, Great Eastern Energy Corporation, said that a new era of growth for the fuel retail segment has been heralded by de-regulation of prices.

Given the rekindled interest of the private companies to enter the market with even greater vigour, it is expected that the fuel market would grow in leaps and bounds in the future. Mr. Suvojoy Sengupta, Managing Director, Booz & Company, the knowledge partner for the conference, said that the oil marketing companies need to prepare for the opportunities and challenges on three key dimensions: redefine strategies around formats and offerings; build capabilities around areas like dynamic pricing and automation and drive down costs by ruthless focus on efficiency.

He said companies need a more targeted marketing approach to evolve with customer preferences; better readiness to develop the right set of capabilities around pricing, loyalty and automation and alignment on a structured approach to effectively respond to innovative competitive offerings in local hands.