MARKETING STRATEGIES OF NON DOMESTIC NON EXEMPTED (NDNE) LIQUIFIED PETROLEUM GAS RETAILERS :

A SELECT STUDY ON INDIAN OIL CORPORATION LTD

Faculty Guide Presented byProf. DEBJANI BHATTACHARYA KAUSTAV BORDOLOI

Roll No : 2011054

ORGANIZATION PROFILE

• Indian Oil Corporation Ltd. is a public sector undertaking under Government of India and formed on the 1st of September 1964 through the merger of Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1958).

• Indian Oil Corporation Ltd. was born on 1st September 1964 with the merger of Indian Refineries Ltd. with Indian Oil Company Ltd.

• IndianOil is India’s flagship national oil company with business interests straddling the entire hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural gas and petrochemicals.

• IndianOil and its subsidiary (CPCL) account for over 48% petroleum products market share, 34.8% national refining capacity and 71% downstream sector pipelines capacity in India.

OVERVIEW OF LPG INDUSTRY

• LPG in India is a largely a regulated market. Pricing and allocation of distribution joints is decided by the corresponding bodies.

• Demand of LPG is growing at a rate of 6% per annum whereas supply is not constant and the gap is filled by imports.

• LPG for domestic purpose customers is supplied at a subsidized rate and for commercial and industrial purposes is market determined.

• In India, share of LPG retailing largely depends on the LPG producing capacity of its refineries. IOCL has the highest number of refineries and the largest capacity of producing LPG

LITERATURE REVIEW

• J. P. West did a study “ Institutional and marketing prerequisites for LPG use” in 1986 to identify the structure and interaction of the institutional framework that administers and regulates current transport fuel use.

• “Consumer Evaluation of Low Price Guarantees: The Moderating Role of Reference Price and Store Image” study was done by Abhijit Biswas, Chris Pullig, Mehmet I. Yagci, Dwane H. Dean in 2002.

• Antonette D’Sa and K.V Narasimha Murthy of” International Energy Initiaties” studied about “LPG as a cooking fuel option in India”.

• The major factors which are driving the LPG market includes clean and efficient source of fuel, growing demand from automobile industry where it is used as auto-gas, global usage of LPG as cooking fuel and government support.

• Rajiv Gandhi Lpg Gas Vitrak Yojana was started in Inida in the year 2012.

OBJECTIVES OF THE STUDY

• The focus of the study was to find out market potential of Non Domestic Non Exempted (NDNE) LPG in Guwahati Region.

 • The study aims to find out the marketing strategies adopted by the

competitors in NDNE marketing.

• To find out the existing problems faced by Indian Oil in marketing NDNE LPG.

• To study the effect of appointing NDNE LPG Retailers by Indian Oil to maximize volume and profit in NDNE LPG.

RESEARCH METHODOLOGY

• TYPE OF RESEARCH :

Exploratory Research• DATA COLLECTION METHOD :

Primary data is collected through personal unstructured probe so as to prepare the questionnaire. Secondary data gathered from periodical Reports, Online data from Indian Oil website, Ministry of Petroleum and Natural Gas web site, official journals, business magazines, annual Reports 2011-12 of various LPG marketing companies and other online sources.

• SAMPLING METHOD:

Convenience Sampling was chosen as it maintains homogeneity and take care of cost and time constraint.

• SAMPLE SIZE:

The sample size used in this project was 100 of which 30 were LPG Distributors, 50 were Hotels and Restaurants and 20 others were Fabrication units. These targets were given a questionnaire to fill and the research was done on the basis of that data.

• SAMPLE AREA :

The Sample area in which the research was done is the city GUWAHATI and adjacent area in Assam.

MAJOR LPG BRANDS

• INDANE (INDIAN OIL)

• BPCL

• HPCL

TYPES OF LPG CYLINDERS OF INDANE

For Domestic purpose:

14.2 Kg Cylinder

For Commercial purpose: 19 Kg NDNE Cylinder

PHYSICAL PARTICIPATION OF BRANDS

94%

4% 2%INDANE BHARAT GAS HP GAS

SALES OF LPG OF INDANE IN TOTALITY

SalesDOMESTIC LPG NDNE LPG

95 %

5%

MARKET SHARE OF NDNE LPG OF LEADING GAS COMPANIES

91%

6%3%

INDANE BHARAT GAS HP GAS

RESPONSE FROM THE DISTRIBUTORSCATEGORYWISE SALES OF NDNE LPG

Canteens Tea Stalls/Sweet Shops

Fabrication units Hotels and Restaurants

SALES 0.05 0.1 0.02 0.83

5%15%25%35%45%55%65%75%85%

PERC

ENTA

GE

RESPONSE FROM THE HOTELS AND RESTAURANTS

80%

15%5%

Indane HP BP

FINDINGS

• All respondents have responded that they use 19.0 Kg cylinders for commercial purpose.• No discounts are given to the customers of NDNE LPG cylinders.

• The price of a 14.2 Kg LPG cylinder meant for domestic use in Guwahati is Rs 393 ( Rs 27.67 per Kg) and that of a 19 Kg NDNE LPG cylinder is Rs 1417.50 (Rs 74.60 per Kg) during the period of study. This price difference of Rs 46.93 per Kg.

• There is a huge demand for subsiderized cylinders and therefore relative demand supply gap always remains.

• Due to this mismatch in rates there is a strong inclination by even commercial users to use domestic LPG cylinders in 14.2 Kgs. Hence strict vigil has to be maintained by companies, distributors, government agencies to ensure that diversion of 14.2 Kg cylinder to commercial usage do not take place. This is required also to ensure availability of domestic cylinders to domestic consumers in time without backlog.

FINDINGS

• IndianOil has developed sufficient storage and bottling capacity in the last year and LPG availability should not be a problem now in NE India.

• LPG distributors get a commission of Rs 21.94 per 14.2 Kgs cylinder and Rs 50.00 per cylinder for selling a 19 Kg cylinder. The per Kg difference is not lucrative enough for the distributor to wholeheartedly erasure selling of NDNE LPG cylinders.

• To sell a 14.2 Kg cylinder no marketing effort is required to be put by the distributor as only supply has to be made by them.

• The share of NDNE in the LPG sales is 5%. The NDNE retailers need to make more efforts to push the sales.

• For the domestic LPG(95% market share) the key focus is- Ensure supply in time.• For the NDNE LPG(5% market share) the key focus is- Expiration of the Market.

SWOT ANALYSIS

• STRENGTH:

1. The LPG infrastructure of IndianOil in NE India as regards to production, storage and bottling capacity.

2. IndianOil reach at every nook and corner of NE India through its vast LPG distributor network.

3. Brand image of Indane is acceptable.

• WEAKNESS :

1. Monitoring- in terms of usage of domestic LPG.

2. Renewal of NDNE LPG cylinders – Booking patterns.

3. Sales target of NDNE LPG is not given to the distributors.

SWOT ANALYSIS

• OPPORTUNITY

1. Boom in hotel and restaurant business in NE India.

2. Fabrication shops potential.

3. Boom is tea stall and sweet shop business.

 • THREAT

1. All other players like BCPL and HPCL are government firms. Hence it is expected that they will survive the competition which in term can create loss in marketing share.

2. Piped gas of Assam Gas Company Limited is a major threat as it is very cheap and convenient.

RECOMMENDATIONS

• NDNE LPG Distributor is to be opened immediately at Guwahati .

• The number of NDNE distributors is to be so planned that each distributor handles 3000 to 4000 cylinders in month. This will enable the distributor to be viable . Huge working capital will also not be required.

• The distributors commission is to be changed from flat Rs 50.00 per cylinder to 5% of the rate before tax. This will take care of the fluctuation in NDNE LPG prices and protect the distributors interest in case of price rise as they will have to increase investment accordingly.

• Aggressive customer loyalty program /discount schemes is to be launched .• All state capitals are to be targeted for opening one NDNE LPG distributor in

each state capital.

FUTURE SCOPE

• The study will help us find out that cost effectiveness to create a separate channel of distribution for NDNE.

• The study will help us to find out that is it required to set a target of sales of NDNE LPG to every individual LPG retailers.

• To create monitoring which is dedicated only to NDNE.

THANK YOU