StartupTalky

Tag: petrol

  • How Are Startups Getting Affected by Rising Fuel Prices?

    The pandemic has hit the Indian economy hard. Consumer demand has fallen drastically and the supply side of the market has become vulnerable to shocks and crunches. But it’s not all for these entrepreneurs. The latest addition to their list of woos is the ever-increasing price of petrol, which is a key manufacturing ingredient for many chemical and pharmaceutical processes and the backbone of energy-driven service startups.  

    The price of petrol has galloped upwards through 2020 and touched all-time highs in June 2021. The government has sighted several reasons for this hike in petrol price but all those claims have been shot down by independent policy experts and economists, who claim the real factor behind this meteoric rise in the price of petrol is the indirect tax levied on it by the Government of India.

    Several economists, energy policy experts, and trade have requested the government to reduce this indirect tax on petrol to help increase the profitability of these already hard-hit startups and these requests have been backed by the State Bank of India (SBI) and Reserve Bank of India (RBI) in their annual and quarterly evaluations. Now, let’s have a look at the impact of the rise in petrol prices on startups, in a sector-wise manner.

    Impact on Startups In the Logistics Sector
    Impact on Startups in FMCG (Fast Moving Consumer Goods) Sector
    Impact on Startups in Appliances Industry
    Impact on Startups in the Pharma Sector
    Impact on Startups in the Core Manufacturing Sector
    Impact on Startups in the Doorstep Service Industry

    Impact on Startups In the Logistics Sector

    The logistics sector is one of the hardest-hit sectors in the current economic scenario. The pandemic and rising fuel prices have helmed the conquest against this sector and have succeeded in closing doors for many budding startups and as well well-established companies.  

    With the increase in diesel and petrol prices, the startups in the logistics sector have been forced to increase the cost of their services to just breakeven and this, in turn, has led to shrinkage in demand.

    Freight owners have complained about the lack of two-way cargo trips and how it has affected their profit model and them vulnerable to losses. Overall, the country’s mobility has been hard hit by this upward climb in the price of petrol.

    The Reserve Bank of India has cautioned the government about the same in its reports on the Indian Economy and the depressionary spiral that the startups and MSMEs of this sector have become prone to, following the price of petrol and other energy commodities like diesel.

    Impact on Startups in FMCG (Fast Moving Consumer Goods) Sector

    Fast Moving Consumer Goods can be defined as products that are sold quickly over the counter and are bought by most consumers, irrespective of their preferences like biscuits, candies, medicines, etc. Due to the steady demand for these goods, the goods have to be shipped continuously to maintain the supply.

    The startups here have faced acute problems with the rise in fuel prices. Due to increased freight costs and distribution costs, the cost of the products has gone up, which has led to the shrinkage of demand for the durable goods produced by these startups.

    All this increased distribution has caused the firm to not even break even and decimated its profits. Also, like fuel is a key ingredient in meeting the energy demands of the production plants and some manufacturing processes, the inflationary push has caused extra trouble for the startups in the FMCG sector.

    Impact on Startups in Appliances Industry

    Currently, this sector is valued at 85,000 crores, and alone the domestic appliances sub-circuited is estimated to be 35,000 crores. The sector used to be one of the most thriving playgrounds for startups. But the increase in manufacturing and transporting costs owing to an increase in fuel prices have hard-hit many budding startups. Also, this increase in petrol and diesel prices has caused a cost-push in raw material, component supply, and operational costs.

    Impact on Startups in the Pharma Sector

    The pharma sector is no stranger to the hardships of increasing oil prices. Petrol and diesel play a huge role in the manufacturing aspect of this industry. The rise in the cost of fuel has, in turn, raised the cost of petrochemical raw inputs and the cost of operating the manufacturing unit.

    Also, to maintain a steady supply of drugs in the markets, startups here have to maintain well-equipped fleets of freights. With the rise in the cost of petrol and diesel, the cost of maintaining and distributing the product through such a logistic mechanism has become excruciatingly expensive for startups to maintain.

    Crude Oil Price vs Retail Price
    Crude Oil Price vs Retail Price

    How Does Fuel Pricing Affects all the Industries?
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    Impact on Startups in the Core Manufacturing Sector

    The core manufacturing sector acts as the backbone of our economy. Being on the most thriving playground for MSME startups, this sector has become the subject of many complex backlashes and ripple effects that accompany an increase in the price of an essential energy commodity like petrol.

    The cost of production and maintenance of plants has shot up rapidly with the increase in fuel price. Petrochemical components have become costlier, along with the logistic cost of acquiring these key components of the manufacturing process.

    The transportation cost of the finished product and distribution cost has pushed the market price to rise to combat the effects of the rise in diesel price. However, this increased shelf price has been met with a rapid demand shrinkage, which has put this sector in a difficult economic spot.

    Impact on Startups in the Doorstep Service Industry

    The doorstep service industry relies on the commitment to procure and provide already available services at the cheapest rate possible. The increase in petrol price has become a great impediment for the sector, as the logistic costs have risen sharply.

    In the past few years, several internet-based startups have come up in this sector, but today most of them have had to close shop and the remaining strive hard to break even. Many economists suggest, that if the fuel price rises any more, the valuation of this industry can fall greatly, and most startups will fail to maintain their business model in the long run.

    Conclusion

    Thus, we can conclude the rampant increase in petrol price has a detrimental effect on the startup atmosphere of the country, irrespective of whichever sector they belong to. A further surge in petrol prices may become the key reason for the closing of startups in the coming months. However, it can be expected that the government will pay heed to the petrol price policy advice given by the apex bank, and eminent economists and reduce the petrol price to create a more business conducive atmosphere.

    FAQs

    What is the effect of the increase in the price of fuel?

    The rise in fuel price affects the price of other essential goods as the transport costs increase. It also leads to inflation which affects businesses.

    Will higher fuel prices lead to inflation?

    Yes, higher fuel prices lead to inflation as the fuel price impacts all the goods and services.

  • How Does Fuel Pricing Affects all the Industries?

    The price of fuel has always been a concerning issue in the country. When the pricing of Fuel rises, it majorly impacts the lives of the common man and the wholesome economy. And, soon after the latest round of fuel price hike by the OMCs (Oil Marketing Companies), the prices of petrol and diesel increased prominently. And if the prices keep on increasing, the lives of citizens and the economy will be highly affected.

    The price of Petrol has reached up to INR 90 per litre and in some places, it has crossed the limit of Rs 100. And The same case with the Diesel too.

    The increased fuel pricing has become such a problem that people are even smuggling from neighbouring countries. The rise in fuel price brings a devastating impact on the economy majorly, which is already suffering from the Covid crisis.

    The rise in fuel prices affects most transportation industries. Also, businesses depend on logistics and transportation chains.

    In this article, we have discussed the effects of increased fuel prices on the economy including other industries and to the lives of common people. Let’s get started!

    Effects of Increased Fuel Price
    How Increased Fuel Prices Affects Other Industries?
    Relationship between fuel prices and economy
    FAQ

    Effects of Increased Fuel Price

    When the fuel prices rise, we know businesses and households are affected broadly. However, it impacts majorly through two things- Inflation and reduced economic growth. Let’s get started with Inflation first,

    Inflation

    In inflation, the products made up of petroleum are affected directly. Moreover, it indirectly affects the industries of manufacturing, heating and transportation. This can lead to an increase in the price of many other products and services.

    And according to the increase in fuel price, the consumption price also increases based on the production.

    Reduced Economic Growth

    The increased price of oil highly affects the economy as well. It reduces the growth of the economy through the demands and merchandise of goods other than fuel. It reduces the demands of those goods because of the increased price of producing them.

    How Increased Fuel Prices Affects Other Industries?

    Retailers

    As fuel is the basic essential to transportation for every mankind. Therefore, they spend a large fraction of their income on fuel purchasing and due to this, the retailers suffer the most as the discretionary spending’s by customers become very low. And if the fuel prices rise, the supplier would deliver its products very rarely to the malls and shopping centres.

    And this would highly affect the marketing sector and increase every material’s price.

    Public Transportation

    When the fuel prices rise, people often prefer public transportation ridership. Because sharing the transport would cost less compared to driving your own vehicle with so expensive fuel in the tank. This also saves from the wastage of fuel in the traffic and would cost less for people. The usage of public transportation is becoming higher in every place with the increased fuel prices.

    Airlines

    Airlines’ largest operating cost goes to the fuel expenses which is directly related to oil procurement. When the fuel prices rise, the airlines are affected broadly from the core of their surface.

    Therefore, when the fuel prices rise the airlines are compelled to increase the charges on the flight tickets from their customers. This results in fewer airways travelling and a huge burden of expenses for the people.

    So when such a scenario happens, the airlines tend to buy or sell the future estimated fuel prices through the investment perspectives. This is called fuel hedging. Besides, this will protect the airlines against the increased fuel prices.

    Automobile Industry

    The automobile industry is widely dependent on fuel consumption. These industries would fall apart if the fuel prices keep increasing. That’s why the automobile industry put its main focus on the manufacturing of smaller, fuel-efficient vehicles such as electric or hybrid vehicles. These could travel up to 250 miles based on their charging extent.

    People have also highly preferred such modification and the purchasing of these vehicles has been increasing over time.

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    Relationship between Fuel prices and Economy

    In the 1970s, the two aforementioned huge fuel shocks were noted based on high unemployment and low growth. This period is also referred to as Stagflation. So it’s likely to say that the fuel prices are directly linked to the economy and anything if unusual happens, the economy is affected majorly. The fuel prices cause a wide fluctuation in the economy of the country.

    Looking back at history, the 1990s and 2000s were recorded as the most huge economic fluctuation period compared similarly to the fuel shocks of the 70s. The relationship between these two could be very convenient as well as challenging. This widely affected the GDP growth and unemployment rate in the country.

    Conclusion

    Over a long time, many economists and analysts have debated on the extent of the effect caused by the fuel prices on the economy of the country and the lives of common people. However, with the recorded research and data we can not deny the fact that the spending habits, consumers confidence correlates with the increased fuel prices.

    And when the price of fuel increases, the economy including many other industries are affected on a wide scale and results in some absolute alternatives or faces loss. The lives of normal people have affected the most and this benefits some industries as well as cause some major loss to others.

    Many surveys have been made on such situations and all those have proved some relation either direct or indirect between the fuel prices and economy of the country.

    FAQ

    Which industries are affected by the oil prices?

    Airlines, Transportation and Automobiles are some of the most affected sectors by the rising fuel prices.

    Why are fuel prices increasing in India?

    Fuel prices have been rising in India due to a rise in crude oil prices in the international market.

  • What is Flex-Fuel Engine | How will it impact the vehicle Industry in India?

    The fuel price in India has been rising for a very long time. This has risen concerns among individuals concerning the use of petrol for vehicles in the country. In major places, the price has seen a rise over INR 100 mark and this urges the need for alternative fuel. Let’s look at what is flex fuels and whether the automotive industry will see a shift in the usage of fuel.

    What are Flex Fuels?
    Flex Fuels in India
    Benefits of using Ethanol or Methanol
    The Major Reason to adapt Flex fuel
    FAQ

    What is a Flex Fuel Engine?

    A Flex Fuel engine is an internal combustion engine. This engine has the feature to run on more than one fuel or even a mixture of fuels. Generally, a mixture of Petrol with Ethanol or Methanol is used in these types of engines.

    The engine can adjust the mixture in any quantity that is provided which is mainly due to the suitable ECU programming and fuel composition sensor.

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    Flex Fuels in India

    The Government of India has announced on 21 June 2021, that it will decide on flex fuels in 8-10 days. The Union Minister has conveyed that Government is planning to make a flex-fuel engine compulsory for the automobile industry in the country. This move is expected to help the farmers as well as boost the economy of the country.

    The main reason stated by the Union Minister is the increase in the price of fuel in India. He conveyed that flex-fuel can be an alternative used by the citizens in order to reduce their expenses on fuel to around INR 30 to INR 35 as one litre petrol in India has crossed the mark of INR 100 per litre whereas Ethanol’s cost would be somewhere around INR 60 to INR 62 per litre.

    He also added that being the transport minister he is going to issue an order to the automobile industry to transform their engines into flex-fuel where the consumers will have a choice to choose whether they require 100 % petrol as fuel or 100 % Ethanol as fuel.

    Petrol Price in India in Rs
    Petrol Price in India in Rs

    Benefits of using Ethanol or Methanol

    Ethanol has a lower energy content and is considered to be better than petrol for the environment as the emissions produced by the vehicle will be relatively less. Also, the Carbon dioxide that is released from the vehicles is said to be absorbed by the plants in the environment that is used for growing the materials required to produce the fuel.

    The main advantage of this fuel is sustainability and another advantage for India regarding Ethanol or Methanol as fuel is that the raw materials are available in abundance. India is a country that has surplus sugar cane, surplus corn, and surplus wheat and the country is facing problems in finding storage places for these.

    The Major Reason to adapt Flex fuel

    One of the major reasons to adapt to this fuel is due to the rise in the import of crude oil into the country. The crude oil import bill currently is between 7 lakh crores to 8 lakh crores in the country. Air pollution and the increase in import of crude oil are the two major concerns faced by the country and adapting to green fuel is a must in India.

    However, petrol currently is already being mixed with Ethanol with around 10 – 15 % and compared to the current level production the idea is not very standard to achieve. In order to also increase the blend in the Ethanol production, there are certain modifications required in the engine. Hence, the automotive industry will have to make necessary changes and get behind the initiative.

    Conclusion

    Ethanol is considered to be a better fuel than petrol and is an important substitute, pollution free, indigenous and cost effective. The procurement of Ethanol has seen a rise from 28 crore litres to 320 crore litres.

    FAQ

    What Is Flex Fuel?

    Flex Fuel is a fuel mixture made of gasoline and between 51-83 percent ethanol.

    What Is a Flex Fuel Vehicle?

    A Flex Fuel Vehicle (FFV) is a vehicle that has been specifically designed to drive using Flex fuel.

    Can You Use Flex Fuel In a Regular Gas Vehicle?

    You should not use Flex fuel if the vehicle is not been designed to run on Flex fuel.

  • Importance of Ethanol in Economy and why India is Spending $7 Billion in Ethanol production?

    India has been planning to shift more into a much greener source of energy. The country has decided to increase the production of Ethanol to increase the production by 2025. Let’s look at the importance of Ethanol in the economy and why India is planning to spend an amount of around USD 7 billion for the production of Ethanol.

    Ethanol Production in India – Latest News
    The reason why India is Spending $7 Billion in Ethanol production
    How Ethanol is made in India?
    How will Ethanol benefit Indian Economy?
    FAQ

    Ethanol Production in India – Latest News

    India has announced that the country is planning to spend an amount of USD 7 billion in order to boost Ethanol production as the country is planning to reduce the dependency on importing the foreign oil and to increase the roll out of much more greener sources of energy.

    India’s oil secretary, Tarun Kapoor had conveyed in an interview that in order to meet the 20 % ethanol blended fuel standard by the year 2025, there will be a requirement of 10 billion litres of Ethanol.

    The reason why India is Spending $7 Billion in Ethanol production

    The Ethanol production target is estimated to be more than triple the amount of Ethanol that is going to be produced as compared to the Ethanol production as of November 2021. As of now, Ethanol produces 9% of the gasoline blend added Tarun Kapoor.

    This move is expected to require around USD 500 billion for the investments in order to build new bio-refineries. The Prime Minister of India, Narendra Modi had also conveyed in the month of June 2021 that the target of the nation in order to make gasoline of 20 % ethanol by the span of 5 years by 2025 is expected to save a huge amount for the country.

    The increase in the Ethanol production is expected to save around USD 4 billion annually. This move will also help in increasing the use of renewable sources of energy as India is the world’s third largest importer of oil and this will help in turning the excess rice and damaged foods of the country into Ethanol.

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    How Ethanol is made in India?

    As of now, the majority of the country’s Ethanol output is made up of the molasses that is obtained from sugarcane. However, the South Asian nations are trying to push for much more production from sources other than sugar which is estimated to make only 10 % of the contribution to the Ethanol production.

    The Government has also conveyed that they would provide financial assistance for setting up the distillation units which will rely more on molasses and the grains for raw materials. According to Tarun Kapoor, the country is expected to reach a stage where the contribution for production of Ethanol will be 50 % grain based and 50 % sugar based.

    Production volume of ethanol in India
    Production volume of ethanol in India

    How will Ethanol benefit Indian Economy?

    The Ethanol industry will create a lot of jobs in the economy both direct and indirect jobs other than these the Ethanol will boost the rural economies; the co-product provides a valuable market for the corn grown.

    Ethanol also helps in reducing the dependency on energy dependence and will reduce the importing of oil barrels of the country. The Ethanol biorefineries also make more than the fuel they also contribute towards food by providing nutritious animal feed like distillers grains. This is one of the most sought-after animals feeds as it is very nutritious.

    Ethanol also contributes towards removing carbon from the environment which is expected to remove around pollution caused by 10 million cars on the road. It is also a cleaner and more greener option compared to the traditional fuel options.

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    Conclusion

    Ethanol has already been extensively adopted in the United States and has been contributing to the country’s economy. The approach taken by the Government of India towards increasing the production of Ethanol will be a significant step in the major sectors of the economy from Automobile to Agriculture.

    FAQ

    Who is the largest producer of ethanol in India?

    Uttar Pradesh has become on of the highest producer of ethanol in the country with the number of distilleries producing the solvent from heavy molasses, a by-product of cane juice.

    Is ethanol production profitable in India?

    The profit on ethanol production has come down to 5rs/litre.

    What is Ethanol used for?

    Ethanol is an industrial chemical; it is used as a solvent, in the synthesis of other organic chemicals, and as an additive to automotive gasoline (forming a mixture known as a gasohol).

  • List of Fuel delivery Startups around the world

    The Covid-19 restrictions around the world has led to an opportunity in the market for the fuel delivery startups. The companies would be able to see an increase in demand for their services as the consumers would prefer staying indoors and to avoid much exposure. Here are the list of fuel delivery startups around the world.

    Yoshi
    Booster
    Zebra Fuel
    Filld
    51autogo
    MyPetrolPump
    FuelBuddy
    Pepfuels
    Humsafar
    FAQ

    Yoshi

    Yoshi is an online platform which enables users to order fuel when there is a requirement. The company also provides a feature of scheduled refueling. The gas and refueling service provided by the company are on a contactless basis.

    The users will just have to provide the location of their car and the fuel would get delivered according to their convenience. Yoshi was started in the year 2015 and has its company located in Palo Alto, United States.

    Booster

    Booster is also an online platform that provides the delivery of gasoline and diesel. They were formerly known as Booster fuels. Users will just have to provide the location details of where their car is parked and open the gas tank. The company executives would arrive, fill it and the invoice would be provided through the mobile application.

    Apart from fuel delivery the company also provides services such as cleaning tires and washing windows. Currently the company operates in the San Francisco Bay and the Dallas Fort Worth areas of United States. It was founded in the year 2014.

    Zebra Fuel

    Zebra fuel is also a mobile application-based fuel delivery startup. According to the requirement of the users the company would send a minivan and an executive who would fill the fuel according to the requirement.

    The company claims that their price to be competitive compared to the inner-city fuel as they purchase the fuel for a whole sale price. The startup also charges a small amount as a service fee according to the timings of the requirement. The startup was founded in the year 2016 and has its headquarters in London, United Kingdom.

    Filld

    Filld is also a mobile application-based fuel delivery startup. According to the request placed by the user the company would send an executive to the location with the fuel. The user will have to pay a small delivery fee and the local average price for the fuel.

    The startup was founded in the year 2015 and has its headquarters located in Palo Alto, United States.

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    51autogo

    51autogo is a mobile application which helps the users in finding the gas stations. The users will be able to locate the nearest fuel station according to their location. The startup was founded in the year 2015 and has its headquarters located in Beijing, China.

    MyPetrolPump

    MyPetrolPump is an online platform which lets user buy fuel according to their requirement. It offers fuel according to the demand with a door step delivery. Users will have to book the required amount through their app and they would source the fuel from the local fuel station and deliver it.

    The mobile application is available for both Android and iOS users. The startup was founded in the year 2016 and has its headquarters located in Bangalore, India.

    FuelBuddy

    FuelBuddy claims to be the first legal startup in India to have permissions to provide the delivery of fuel across the country. Their mobile application is available for both Android and iOS users. They provide fuel according to the required quantity and the scheduled time by the customers.

    FuelBuddy had acquired MyPetrolPump as the latter company focuses on bulk orders and MyPetrolPump provides retail individual services.

    Pepfuels

    Pepfuels is also a fuel delivery startup. The users will have to book the required amount of fuel through the website of the mobile application of the company. They will have to register their details and provide the information about the location.

    The startup was founded in the year 2017 and provides services in the Asia-Pacific region.

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    Humsafar

    Humsafar is also another fuel delivery based startup. The user will have to install the mobile application, enter the details and place the order. The startup provides services to sectors such as construction sites, manufacturing and mining industry, hotels, hospitals, schools, automobile industry, earth moving equipment and gensets, agriculturists

    The company was founded in the year 2016 and has its headquarters located in Delhi, India.

    FAQ

    What is fuel delivery system?

    The fuel delivery system consists of all the components which supply the engine with fuel.

    Can I buy petrol online?

    You can place your order online and get fuel delivered at your location.

    Can I get petrol delivered?

    Yes, you can get petrol delivered to your doorstep.

    Conclusion

    The fuel delivery startups in India are expected to grow in the recent years. It is estimated that INR 2,000 crore market has been opened for the fuel delivery startup in the country. In the same way the fuel delivery startups across the world have seen an increase in demand.