India:State Oil Companies to Outsource Logistics

The three key state-run fuel marketing companies (OMCs) are working together to outsource the creation and maintenance of logistics infrastructure that can reduce costs at a critical time. 

 Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL), all have their own individual downstream facilities. This common infrastructure includes bottling plants, depots and terminals.

The heads of the three OMCs have agreed in principle to follow this “common user facilities” approach, said R.K. Singh, chairman and managing director of BPCL. “This can be one of the ways in which we can bring down costs. We can follow a BOT (build, operate and transfer) or BOOT (build, own, operate and transfer) model. The operations and maintenance of some of our existing facilities can also be outsourced.” Some such common user facilities were already in place, albeit in a “small and scattered way”, and the idea is to widen the initiative and make it meaningful, Singh said.

The companies are jointly evaluating factors such as the locations at which these facilities can be set up and managed by a third party, said a senior official in charge of logistics at one of them. He did not want his company or himself to be identified.

“Wherever the scale of operations is large enough to justify economy of scale, we may decide to run these facilities ourselves,” this official said. “But in many areas, where the operations are on a smaller scale, it may make sense for the three companies to jointly utilize these facilities.”

A Special report has been prepared for Delegates attending the forthcoming Goa Business Forum.