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Price War in Competitive Bidding Shrinking Profit Margin of OMCs; What is the Way Forward?

News

A fierce fight for market share has broken out between oil companies as private and state players make bold bets for winning contracts to supply diesel to bulk customers and challenge the dominance of Indian Oil Corporation (IOC), the leader.

Source:  ET

SNP Insights

Deregulation of Oil prices paving the way for more vigorous participation by private players, leads to low price competition for bulk contract supply. Stiff price war might lead to shrinking profit margin of OMCs. In order to reduce the cost & increase profitability, cost efficient logistics infrastructure like inland water ways & coastal transport need to be adopted.

Although price based competition will stop at certain point above marginal cost & after that more thrust would be given on factors like longer credit period, reliable supply & more robust infrastructure to woe the buyers & win the contract.

Source: SNP Infra Research