Fuel E-commerce in India: An Overview

Many startups across the world are leveraging tech to deliver on-demand fuel

By
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The e-commerce segment in India is seeing many new models by the day. One such trend that has picked up is the e-commerce of fuel. Many startups across the world are leveraging tech to deliver on-demand fuel. Some global startups engaged in this space include San Diego-based Pearson Fuels which started as early as 2002, Lagos-based SnapFuel, London-based Gas Village and Moscow-based GlobalFuel. More prevalent in the US, the ease and convenience offered are the keywords here.

Unsplash

Though not a very popular trend in India yet, we are seeing quite a few startups cropping up in this space. These startups are also attracting investments. For instance, Repos, founded by Aditi Bhosale Walunj and Chetan Walunj in 2017, is backed by Ratan Tata. We also have The Fuel Delivery, Humsafar, FuelBuddy and Pepfuels. Some road assistance startups such as Roda on road assistance and iSafe Assist also offer fuel delivery as one of their services.

"With some experience of running a retail fuel station(petrol pump), we found out that there is a huge gap between supply and demand of energy in India and across the world. The bulk consumers in India find it extremely difficult to procure diesel from the retail fuel stations and the inefficient process of fuel procurement leads to considerable losses for these businesses. This is when the idea of doorstep fuel delivery was born," said Chetan Walunj, founder and CEO, Repos, explaining the reason behind venturing into the space.

The startup believes that providing fuel at the doorstep with the help of special purpose vehicles such as mobile petrol pumps can not only save enormous amounts of fuel from being wasted but can also create value in terms of environmental conservation.

Humsafar, a startup that offers doorstep delivery of diesel for industries and social entities, has created a network to connect the energy user and supplier and solve the last mile connectivity issue. "Our vision is to deliver the energy resource in the most efficient and safe manner. Our business model centres around fabricating advanced technology-driven bowser, helping startups enter into the energy space. Our app-driven fuel delivery model called Fuel Humsafar enables clients to place an order and get fuel within 24 hours of order placement," said Sanya Goel, co-founder and director, Humsafar.

The startup delivers diesel through Humsafar Mobile Petrol Pump or Safar20, a 20-litre jerry can. The fuel is procured from regular petrol pumps or directly from OEMs like IOC, BPCL, HPCL, etc., through a very streamlined process. For this process, a nominal delivery charge is taken from the customers. The price of the diesel is also the same as charged by the petrol pump. The startup is present in 25 states and has supplied over 1.2 cr litres of diesel pan India so far. Its prominent clients include Medanta Hospital, L&T (Construction), Delhi Metro, Killer (Construction), Taj Group of Hotels, Mahindra Group (Construction Site), Lemon Tree Hotel, Indigo Airlines Airport Terminal (Construction), IGI Airport, others.

The white space and hurdles

"The doorstep fuel delivery model has grown rapidly across the country and scaled up even faster in the post-Covid era, resulting from structural constraints, changing buying habits, and technological disruptions," said Neha Singh, co-founder and CEO, Tracxn.

According to reports, the market to deliver diesel is about 25 million metric tonnes. The legalization of doorstep diesel delivery has further opened up a huge previously untapped market. This market includes jobs not only as delivery service providers but also as mobile petrol pump (bowser) fabricators, storage tank fabricators, mentors who help initiate entrepreneurs into the industry, and so on, say experts.

"Diesel is required by multiple industries to run their static earth-moving machinery and is also used to fuel gen-sets (big and small) throughout the cities, so the scope of work across the verticals is massive and can be actively monetized. Also through various regulations, the government actively encourages the adoption of the delivery method, on grounds of it being more sustainable for the environment and more time and cost-effective for economic productivity," believes Goel.

With the government opening up this industry for any aspiring individual through FuelEnt policy, the space has seen the entry of a lot of young 1st generation and 2nd generation entrepreneurs. "The Government of India is also driving the entire vision through different policy amendments. The service is now available across the country and consumers are aware of such a service and technology involved to a good extent," said Walunj.

FuelEnt is a flagship initiative by the government of India, which aims to build a strong ecosystem for entrepreneurs looking to drive sustainable growth.

"The fuel delivery market is fast evolving with oil marketing companies entering into agreements with startups. It is potential for startups to become a 'FuelEnt' (Fuel Entrepreneur) while generating employment at the grassroots level. We have seen a rising trend for e-commerce service delivery, especially in metropolitan cities. Also, last-mile delivery of diesel has always been a challenge for all businesses and operations where diesel is used as a fuel to run operations. Further, the pandemic has accelerated digitization, with companies going the extra mile to provide a superior customer experience," said Rakshit Mathur, founder and CEO, The Fuel Delivery.

The startup has recently signed an LoI with Mahanagar Gas Limited (MGL) to deliver CNG Composite Dispensing Unit (CDU) in Mumbai and has become the first startup in India to provide CNG at the doorstep.

Experts also say that we should look at fuel delivery not only from a petrol and diesel perspective but also from the perspective of the growing EV space, where we can have the EV vehicles being charged on demand. "The charging points are not too many, so this is one option, which can be considered as a category creator. EV charging on-demand basis can open up a new perspective to fuel delivery. We are looking at newer cleaner technologies, which can be a 'pull' factor and can address the fuel needs of the consumers. There are a few interesting opportunities in this space and we are evaluating the options," said Brijesh Damodaran, co-founder and chief investment officer, Auxano Capital.

However, these startups have many challenges that need to be addressed. "Consumers are price-sensitive and price-conscious as the fuel is a commodity. Getting the use case right in terms of location, and consumer, besides regulatory and safety compliances (especially in the case of petrol and diesel), are factors that influence this space. Can this scale and get repeat users is the key," said Damodaran.

Neha agrees. "There is always a margin pressure, when you work with a local petrol pump, if you don't then there is a channel conflict. The prices are standardized. The margins are already wafer-thin so it's hard to see how it is possible to keep it cost-effective, given the low price elasticity and the dealers' margins. Ensuring consumer safety is also a challenge."

"Petroleum dealers have claimed that their business will be adversely affected by such projects and have also voiced their safety concerns as they think fuel delivery to doorsteps by a private firm is illegal and might be dangerous. As it is a regulated market, investors might feel that any adverse regulation can undo all the progress achieved so far," she added.

While, it's interesting to see companies like Repos Energy, FuelBuddy, Pepfuels, The Fuel Delivery, and Deliver Fuel coming up, it is still a niche business model. Though it has a bigger room for growth, experts feel that fuel e-commerce still has a long way to go as compared to online food or grocery delivery.