Summary Notes

Bharat Petroleum Corporation Limited (BPCL)

BPCL is a Government of India controlled Maharatna oil and gas company headquartered in Mumbai,
Maharashtra. The Corporation operates two large refineries of the country located in Mumbai and
Kochi. The company is ranked 358th on the Fortune list of the world’s biggest corporations as of 2016.

Operations:

Bharat Petroleum operates the following refineries:

 Mumbai Refinery : Located near Mumbai, Maharashtra. It has a capacity of 13 million metric
tonnes per year.
 Kochi Refineries : Located near Kochi, Kerala. It has a capacity of 15.5 million metric tonnes per
year.
 Bina Refinery : Located near Bina, Sagar district, Madhya Pradesh. It has a capacity of 6 million
metric tonnes per year. This refinery is operated by Bharat Oman Refineries Limited, a joint
venture between Bharat Petroleum and Oman Oil Company.
 Numaligarh Refinery : Located near Numaligarh, Golaghat district, Assam. It has a capacity of 3
million metric tonnes per year.
The company business is divided in seven SBUs (Strategic Business Units), like Retail, Lubricants,
Aviation, Refinery, Gas, I&C and LPG. They have popular Loyalty Program like Petro card, Smart fleet.
Background of the company:

Around 1860s, the world witnessed vast industrial development that ultimately lead to an increase in
the petroleum refineries. This was also the time that BPCL’s historical journey began as Burma Oil
Company. Although incorporated in Scotland in 1886, the Burma Oil Company became an important
player in the South Asian market that grew out of an enterprise named Rangoon Oil Company
(formed in 1871) to refine crude oil produced from primitive hand dug wells in Upper Burma
independently.

The Search for oil and gas in India began in 1886, when Mr. Goodenough of McKillop Stewart
Company successfully drilled a well near Jaypore, Upper Assam, striking oil. However, it wasn’t until
1889 when the Assam Railway and Trading Company (ARTC) struck oil at Digboi that a chain reaction
sparked off, making the beginning of oil production in India.

While discoveries were being made and industries expanded, John D. Rockefeller and his business
associates acquired control over numerous refineries and pipelines. With these acquisitions under
their belt, they went on to form the Standard Oil Trust – a giant. Observing this and to counter the
growing significance of Standard Oil, three largest rivals - Royal Dutch, Shell and Rothschild’s - came
together to form a single organization called Asiatic Petroleum to market petroleum products in
South Asia. In 1928, Asiatic Petroleum (India) joined hands with the Burma Oil Company, an active
producer, refiner and distributor of petroleum products, particularly in Indian and Burmese markets
to form the Burma-Shell Oil Storage and Distributing Company of India Limited.
Burma Shell began its operations with the import and marketing of Kerosene and soon proved itself to
be a pioneer in more ways than one. The company imported oil products in bulk and transported
them in 4-gallon and 1-gallon tins all over India. The company also took up the challenge of reaching
out to people in remote villages to ensure every home was supplied with kerosene. Thus, the
development and promotion of efficient kerosene-burning appliances for lighting and cooking
became an important part of its kerosene selling activity.

With the advent of motor cars, came canned Petrol to be subsequently followed by fuel service
stations. In the 1930s, retail sale points were built with driveways set away from the road. As more
such service stations began to appear, they soon became an accepted part of road infrastructure and
development. Post war, Burma Shell established efficient and up-to-date fuel service and filling
stations to give its customers the highest possible standard of service facilities.

On 15th October 1932, when civil aviation arrived in India, Burma Shell had the honor of fueling J.R.D.
Tata's historic solo flight in a single-engine De Havillian Puss Moth from Karachi to Bombay via
Ahmedabad. Thirty years later, i.e. in 1962, Burma Shell again had the privilege of fueling Mr. Tata's
re-enactment of the original flight. The company also fueled the erstwhile flying boats that carried
airmail, at slightly higher rates than sea transport, across several locations.
Showcasing its pioneering spirit, the company introduced LPG as a cooking fuel to Indian homes in
the mid-1950s. As always, it went beyond selling petroleum, educating customers and offering better
services and products. Besides selling Bitumen, the company pioneered desert road construction and
imparted training road engineers. It provided free technical services to industrial customers - big and
small - and over time, this spirit of collaboration became part of company culture.

On 15th December 1951, the Burma Shell Group signed an agreement with the Government of India
to build a modern refinery at Trombay, Bombay. Soon after, on 3rd November 1952, Burma Shell
Refineries Limited was incorporated as a private limited company under the Indian Companies Act
and began working on the marshlands of Trombay.

With relentless hours of work and effort put in by both man and machine, the swamps gave way to
towers, tanks of steel and miles of pipeline. Soon, the refinery spread over 454 acres of land at Mahul,
went on-stream on 30th January 1955, one year ahead of schedule.

Dr. S. Radakrishnan, the then Vice President of India, declared the 2.2 MMTPA (Million Metric Tonnes
Per Annum) Refinery open on 17th March 1955, making it the largest refinery in India then. On 24
January 1976, the Burma Shell was taken over by the Government of India to form Bharat Refineries
Limited. On 1 August 1977, it was renamed Bharat Petroleum Corporation Limited. It was also the first
refinery to process newly found indigenous crude Bombay High.

In 2003, following a petition by the Centre for Public Interest Litigation, the Supreme Court restrained
the Central government from privatizing Hindustan Petroleum and Bharat Petroleum without the
approval of Parliament. As counsel for the CPIL, Rajinder Sachar and Prashant Bhushan said that the
only way to disinvest in the companies would be to repeal or amend the Acts by which they were
nationalized in the 1970s. As a result, the government would need a majority in both houses to push
through any privatization.

Systems and procedures related to the study:

The study was conducted to understand the distribution channel/network of BPCL.

The distribution channels:

BPCL operates on three formats of petrol pumps:

These are:

1. Company-owned Company-operated: It is called as COCO petrol pumps. These are owned by

company, these are large forms of petrol pumps. These are the benchmarks for high-quality
petrol in Indian market.
2. Company-owned Dealer-operated: These forms of petrol pumps are available only in cities
and highways. The infrastructure of these petrol pumps is built by the company and the
dealer also operates it.
3. Dealer-owned dealer operated: These are rural outlets which is run by dealer-owned and
dealer-operated. The infrastructure will be of the dealer like land and immovable assets.
Company will provide dealers with moveable assets like pump dispensing unit, pump motor,
tank. This will be in rural market.

Also, company came up with special form of outlets such as One-stop shoppers stop which was
established on keeping truck drivers in mind. These outlets have multiple shops, salons, dhabas etc,
even parking space is available for trucks. Other form is Highway Star, nowadays most people are
travelling by cars, therefore we are benchmarking some of the highways for Highway Star where with
petrol pumps have green toilets, good dhabas to serve these types of customer. We have branding of
petrol pumps like pure for sure and pure for sure platinum and these forms are run continuously
parallel to other forms of petrol pumps. Mainly this distribution channel is mix-accelerating
translation model where either it is operated by the company or it is operated by the dealer.

Transcript of the interview with Mr. Mohan Sri Ram S (Ex-employee of Bharat Petroleum Corp. Ltd.)

Me: Hello, Good Morning Sir.

Mr. Mohan: Good Morning tell me.

Me: Sir, this is Aman Deep Sharma from IIM Raipur. I called you yesterday and we talked about the
distribution channel information of BPCL and you told me to call next day as you were busy in some
kinds of stuff. So, can we start today?

Mr. Mohan: Yes, Mr. Aman please go ahead.

Me: So, my first question is what are the distribution channel used in your firm?

Mr. Mohan: Let me first brief about my company. BPCL comes with different SBUs, major one is like
initial customer, they may be handling B2B sales of all petroleum products and other major heels are
LPG who are mainly concentrating on bottling and compact delivering of LPG cylinders, then there is
lubricant, retail SBUs etc. The Retail SBUs are the major contributor of company’s revenue. They
contribute around 60% of company’s revenue. The retail SBUs consists of petrol pumps who are
dealing with the market. I worked in retail, so let’s conclude more about retails. We basically operate
on three formats of petrol pumps
 I. Company-owned company-operated: It is called as COCO petrol pumps. These are owned by
company, these are large forms of petrol pumps. These are the benchmarks for high-quality
petrol in Indian market.
II. Company-owned dealer-operated: These forms of petrol pumps are available only in cities
and highways. The infrastructure of these petrol pumps is built by the company and the
dealer also operates it.
III. Dealer-owned dealer operated: These are rural outlets which is run by dealer-owned and
dealer-operated. The infrastructure will be of the dealer like land and immovable assets.
Company will provide dealers with moveable assets like pump dispensing unit, pump motor,
tank. This will be in rural market.

Also, we have special form of outlets such as one-stop shoppers stop mostly it is built for truck
drivers, wherein parking space and a lot of shops, salons, dhabas, paan shops etc are present.
Other form is Highway Star, nowadays most people are travelling by cars, therefore we are
benchmarking some of the highways for Highway Star where with petrol pumps have green
toilets, good dhabas to serve these types of customer. We have branding of petrol pumps like
pure for sure and pure for sure platinum and these forms are run continuously parallel to other
forms of petrol pumps. Mainly this distribution channel is mix-accelerating translation model
where either it is operated by the company or it is operated by the dealer.

Me: Okay Sir. So now I will go with the second question which is who all are the stakeholders in
your distribution channel?

Mr. Mohan: Stakeholders in the distribution channel are:

I. The Dealer and next important person are

II. Driver salesman or the driver saleswoman

Me: What is the function of the stakeholders?

Mr. Mohan: Functions of dealers are already mentioned in the marketing discipline guidelines which is
common to all marketing companies and dealer must maintain the protocol and he/she must
maintain all the facilities given by the company. He/she must keep in good condition and return it
properly when and whenever asked by the company and main responsibility of the dealer is to hire
proper DSM because company is not maintaining direct relationship with the DSM and therefore it is
sole responsibility of the dealer is to manage them.

Me: Okay Sir. My next question is what are the skills that you expect from your distribution channel
stakeholders?

Mr. Mohan: From dealers we expect supply and demand knowledge of the local market, even if they
don’t have earlier we will train them with our interaction or in an organized manner. Sometimes
business meeting is held in the company to train them. Mostly the learning happens on during
different situations, the dealers are mostly new, so we will make sure they learn the local market and
we have to groom them accordingly and they have to maintain the standard of the company. Local
branding of retail outlets is very important, nobody knows no customer goes to petrol pumps
whether it is BPCL, HPCL or IOCL outlets. For example, in my area there is an outlet of N. Baburao, he
is known for his own goodwill. He is known as a good person in the local community, people go to his
petrol pump because of him. So there the brand of BPCL is lower than the brand of N. Baburao. And
next we are in the consolidation of DSM, they are the face of the company to the customer, they are
least priced, but they are the face of BPCL whenever customer comes for fueling and we expect them
to be well groomed and well mannered. They should have good hot schemes for example when a
customer comes for fueling and he doesn’t have the balance, they should treat him in such a manner
that the customer again comes for fueling. Therefore, these minute things DSM should be able to
adopt and groomed itself.

Me: My next question is what are the factors you consider while selecting the stakeholder?

Mr. Mohan: There is a state guideline by Ministry of Petrol and Natural Gas i.e. dealer selection
guideline and we have to abide that while selecting the dealer. Early you go for statewide
advertisements where you state the type of man require, the size of area/location. We will also
advertise the type of outlet we are proposing out there and formats like company-owned company-
operated (there is no dealer we just ask for their land), and for the rest we will first ask for the land
and the dealer who will be ready to provide his or her own land then for certain he will be eligible and
for certain priority will be for people who are coming with the lease on the land if you have advertise
for. This is the minimum criteria and second there is an education criterion, a dealer should have a
minimum graduate qualification. After fulfilling all this criterion, they will be selected on lottery. And
then we invite a district collector or an immediate rank holder to drive the lottery in front of the
press. This is how a dealer is selected and the DSM should be selected by the dealer and company
doesn’t have control on that.

Me: Thank you very much Sir for the deep insights of your company’s distribution channel.

Indian Oil Corporation Limited (IOCL)

Indian Oil Corporation Limited (IOCL), commonly known as IndianOil is an Indian state
owned oil and gas company with registered office at Mumbai and primarily headquartered in New
Delhi. It is the largest commercial enterprise in the country, with a net profit of INR 19,106 crore (USD
2,848 million) for the financial year 2016–17. It is ranked 1st in Fortune India 500 list for year
2016 and 168th in Fortune's ‘Global 500’ list of world's largest companies in the year 2017. [5] As of 31
March 2017 IndianOil's employee strength is 33,135, out of which 16,545 are in the officer cadre.
IndianOil's business interests overlap the entire hydrocarbon value-chain, including refining, pipeline
transportation, marketing of petroleum products, exploration and production of crude oil, natural
gas and petrochemicals.
IndianOil has also ventured into alternative energy and globalization of downstream operations. It has
subsidiaries in Sri Lanka (Lanka IOC), Mauritius (IndianOil (Mauritius) Ltd) and the Middle East (IOC
Middle East FZE). IndianOil is scouting for new business opportunities in the energy markets across
Asia and Africa. It has also formed about 20 joint ventures with reputed business partners from India
and abroad to pursue diverse business interests. Indian Oil has its R&D Centre located in Faridabad,
Delhi NCR.
In May, 2018, IOC become India's most profitable state-owned company for the second consecutive
year, with a record profit of ₹21,346 crore in 2017-18, followed by Oil and Natural Gas Corporation,
whose profit stood at ₹19,945 crore.
Operations:

Business Divisions
There are 7 major Business Divisions in the organization:

 Refineries Division
 Pipelines Division
 Marketing Division
 R&D Division
 Petrochemicals Division
 Exploration & Production (E&P) Division
 Explosives and Cryogenics Division

Products and services

Indian Oil accounts for nearly half of India's petroleum products market share, 35% national refining
capacity (together with its subsidiary Chennai Petroleum Corporation Ltd., or CPCL), and 71%
downstream sector pipelines through capacity. The Indian Oil Group owns and operates 11 of India's
23 refineries with a combined refining capacity of 80.7 MMTPA (million metric tonnes per annum).
Indian Oil's cross-country pipeline network, for transportation of crude oil to refineries and finished
products to high-demand centers, spans over 13,000 km. The company has a throughput capacity of
80.49 MMTPA for crude oil and petroleum products and 9.5 MMSCMD for gas. On 19 November
2017, IOC, in collaboration with Ola, launched India’s first electric charging station at one of its petrol-
diesel stations in Nagpur. Indian governments’ National Electric Mobility Mission Plan launched in
2013 aims at gradually ensuring a vehicle population of 6 to 7 million electric and hybrid vehicles in
India by 2020.
Systems and procedures related to study:
The study was done to understand the distribution channel of IOCL. The following procedures were
asked and understood:
The distribution channels:
These consists of three components:
First the crude oil is refined at the refineries and then refined products are transported to the
depots/terminals via pipelines and if any problem occurs, it is transported with the help of Indian
Railways. These refineries are completely owned and controlled by IndianOil. These depots/terminals
are also totally controlled and owned by the company and it is not outsourced. These depots serve as
regional storages.
From the terminals it is the responsibility of the transporter which is known as transporter tanks to
deliver these petroleum products to the dealer/retailers. These tanks come with four types of storage
capacity for example, 10,000 liters, 18,000 liters, 20,000 liters and 24,000 liters. The dealers/retailers
are required to give sufficient amount of time to deliver the products. They are advised to provide
order well before time.
Dealers/retailers sell petrol, diesel and gasoline to the end consumer.
 Process Flow Chart:

Refinery
Freight Rake Pipeline/Indian
Railways

Depot
Information (order) Tanks/Truckload

Retailers

Transcript of the interview with Mr. Anand Kumar (Field Officer, Indian Oil Corp. Ltd.)

Me: Hello, Good Morning Sir.

Mr. Anand: Good Morning tell me.

Me: Sir, this is Aman Deep Sharma from IIM Raipur. I called you yesterday and we talked about the
distribution channel information of IOCL and you told me to call next day as you were busy in some
kinds of stuff. So, can we start today?

Mr. Anand: Yes, Mr. Aman please go ahead.

Me: So, my first question is what are the distribution channel used in your firm?
Mr. Anand: Currently I am working with Harichand Coal Segment of IndianOil. IndianOil provide petrol
diesel and caters though different forms of segment like retail outlets. We also supply petrol, diesel to
companies like ACC which requires huge amount of diesel almost every day. Mostly it is done so they
don’t have to come to our petrol pumps frequently.

Now I tell you about our distribution channel. First, the crude is refined at our refineries, and then
from our refineries they are transported using different forms and the most suitable transport
method is via the pipelines. Through these pipelines they are transported to our terminals, terminals
are depot points where petrol, diesel and other products are sold in huge quantities. If any depot is
not connected via the pipeline or any difficulty occurred, then it is transported through oil rakes using
Indian Railway. From the depot we have to transport our products to our retail outlets and we have
multiple transporters to do that and we call them tank transporters. They have the capacity of 10,000
liters, 18,000 liters, 20,000 liters and 24,000 liters. These four quantities are available, and the use of
these tanks depend on from where to where we are transporting our products. At retail outlets these
tanks are unloaded, and customer get petrol and diesel from outlets.

Me: Okay Sir. So now I will go with the second question which is who all are the stakeholders in your
distribution channel?

Mr. Anand: We don’t deal with too many stakeholders. Our first stakeholder is Indian Railway, second
one is the transporters and the third one is the dealers/retailers who sale our products to end
consumers.

Me: What is function of the stakeholders?

Mr. Anand: Our first stakeholder Indian Railway loads the products from our refineries and delivers
them to terminals, from here our second stakeholder i.e. transporters take these petroleum products
to our third stakeholder i.e. retailers who sale these products to end consumers.

Me: Okay Sir. My next question is what are the skills that you expect from your distribution channel
stakeholders?

Mr. Anand: Well from dealers we don’t expect too much but however the company guides them with
standard operating procedures like how the products to be unloaded from tanks and how it should be
maintained and sold to customers. The company’s only expectation from these dealers is to adhere to
the guidelines of the company. Other than this basic IQ skill is expected from the dealer in case of
handling of these products and what safety measure he/she has take to take. Also, how to approach
to IndianOil in case of any emergency or when they require supply from us they can connect through
mobile phone, computer or can write a letter to IndianOil and give your order. Your order will reach
you within stipulated time.

Me: My next question is what are the factors you consider while selecting the stakeholder?

Mr. Anand: Transporters are selected through a random process but mostly by how efficiently past
transportation has been done by a transporter, but this process is not followed much as the
competition is very tough for IndianOil. Mostly that transporter is selected who has done a lot of
transportation for IndianOil and is trustworthy. Incase of dealers/retailer lottery system is followed.
Me: Thank you very much Sir for the deep insights of your company’s distribution channel.