See no fall in Q3 sales; cashless purchase doubled: HPCL Chief

To promote its 'go cashless campaign', the government is leaving no stone unturned and is encouraging every means for people to adopt digitisation. In an effort to reduce the woes of the people and give them something to cheer about, HPCL is giving cashback and rewards on fuel purchases made by credit/debit cards. Cashless purchase has doubled from what it used to be before the roll-out of demonetisation, said MK Surana, CMD of the company. In conversation with CNBC-TV18, the company chief said that HPCL hopes to have similar growth in the third quarter as in the last quarter due to the spike in the offtake of the fuel during the cash chaos period. He also said, with this hike the company will be to maintain the earlier second quarter marketing margins on both petrol and diesel, ranging from Rs 1.5- Rs 2.Below is the transcript of MK Surana’s interview to Latha Venkatesh, Sonia Shenoy and Varinder Bansal.Latha: With this increase, are you square with both the global increase in your raw material price as well as the little bit of money that you may have lost because of the discount given to those on who buy on card.A: We will be squared with the global crude oil prices. But actually right now, we have not factored in the discount which we are giving on the cards because we will work it out separately.Latha: What percent of diesel is being bought on cards?A: Actually in our case, the total sale of transport fuel is around 60-70 percent will be diesel and 30 percent will be petrol.Latha: I wanted to know how much in December itself is being purchased on cards.A: Actually the cashless purchase has doubled from what it used to be earlier after this announcement.Sonia: So, with this hike, what kind of marketing margins are you looking at for Q3 and Q4 on an average?A: We will be able to maintain the earlier Q2 marketing margins on both petrol and diesel with this hike now.Latha: Which is what, Rs 2 on diesel as my colleague was saying?A: Rs 1.5-2.Sonia: Rs 1.5 on diesel and on petrol, would it be around about Rs 1.8?A: Almost similar, Rs 1.5-2, we will be able to make.Varinder: Also, with this, can we easily confirm that Q3 gross refining margins (GRM) will be above USD 5 per barrel?A: GRM is a separate issue and marketing margins is a separate issue. Marketing because the refineries work on the refinery transfer price (RTP) basis. So, the GRM is not a function of the marketing prices.Latha: Yes, that we agree, but that is a separate question my colleague is asking.A: As far as the GRM is concerned, we should be able to maintain reasonable GRMs because the tracks were better in Q3 compared to Q2. In fact, the tracks started improving in the later part of Q2. So, we definitely hope to have the reasonable GRMs in Q3.Latha: USD 6 per barrel?A: Let us see rather than saying the exact number. But I hope it to be better than Q2.Sonia: In the last couple of days, there were a lot of reports that the price increases by the oil marketing companies may be deferred. So, there was some pressure on the stocks, but now with this price increase that you have undertaken, can you give us an assurance that these regular price increases will take place by the oil marketing companies?A: Actually, the prices, we track the global crude prices and accordingly, we adjust the marketing prices of the petrol and diesel. And we will continue to do that. So, there is no question of assurance or not assurance, but it moves in line with the global market now. And that is what has been done.Varinder: Do you expect the retail price discounts to last for the entire duration of FY18?A: You are talking about the cashless transaction discounts?Latha: Yes.A: No, there is nothing like that. Actually the idea is to promote the cashless economy. And whenever you try to do something new, you need to give such incentives to remove the barriers in the mind of the people and make the people cross over the threshold and the people who are not using this cashless mode to incentivise them to do that. Now there is nothing that it should be continued or not continued. We will see how it moves and how it helps us.Varinder: But, have you been told something in terms of the time duration of this discount?A: No, nothing like that. Actually, we will watch how it helps us and how it progresses and depending on that, we will decide accordingly.Sonia: Some reports, some analysts are suggesting that based on the current crude spot price, thee retail prices should increase about 4 percent more and there is an expectation that that price increase would come through on January 1. Is that something that we can expect?A: No, the retail price increase is a function of the actual increase or decrease in crude prices, at the same time, our perception for the future prices as well. So, the current spikes or the short-term spike may not be factored in completely in some cases. So, it is also a function of the perception which we have about the future prices.Varinder: Domestic sales went up by nearly 3 percent if I am not wrong in the last quarter. Do you expect that the Q3 sales could be lower than that?A: No. I do not think so because there was a spike in the offtake of the fuel during the demonetisation period. But we still hope to have on an average a similar growth in Q3.Latha: But at some point demand is elastic to price, is it not?A: Yes, it is. At some point, the prices are elastic. So, the diesel prices are more elastic than the petrol prices. The petrol prices, we have not seen much of elasticity in the prices in India market. But, the consumer has seen the high price scenario also of USD 100 per barrel and we also seen the low price scenario of USD 36-37 per barrel. So, we have got the inputs available to that extent that is how the market behaves.Latha: We never got the advantage of USD 30 per barrel. It always went in as fuel hikes. We saw only USD 70 per barrel. I do not think we saw anything lower than that, did we?A: Actually there are some adjustment in the excise duty, etc. also. In a way it is better also because otherwise the consumers will get used to a very low pricing scenario and that will be a sudden shock if the prices are increasing substantially and it will create too much of volatility in the overall market. But, the band has definitely been seen in the market for the prices rise and falls.