Diesel price for bulk users hiked Rs 25 a litre; retailers stare closureFuel prices have remained unchanged across metro cities for the most prolonged duration when the rates have remained static since the daily revision of prices began in June 2017.
Still, diesel prices have risen for bulk users by Rs 25 per litre, widening the losses for retailers.The Centre had cut excise duty on November 4, 2021, to give relief from prices that had reached an all-time high level.
The government had slashed the duty on petrol by 5 per litre and diesel by 10 a litre, leading to a substantial reduction in fuel prices.Later in December 2021, the Delhi government had reduced the value-added tax (VAT) on petrol from 30 per cent to 19.40 per cent.
With this, petrol prices in the national capital were slashed by 8.56 per litre.But the price of diesel sold to bulk users has been hiked by about Rs 25 per litre in line with a near 40 per cent rise in international oil prices, but retail rates at petrol pumps remain unchanged, sources told PTI.Petrol pump sales have jumped by a fifth this month after bulk users like bus fleet operators and malls queued up at petrol bunks to buy fuel rather than the usual practice of ordering directly from oil companies, widening retailers' losses.The worst-hit is private retailers like Nayara Energy, Jio-bp and Shell, who have refused to curtail any volume despite a surge in sales.
But now, closure of pumps is a more viable solution than continuing to sell more fuel at rates that have been on freeze for a record 136 days, three sources with direct knowledge of the development told PTI.In 2008, Reliance Industries had shut all of its 1,432 petrol pumps in the country after sales dropped to almost nil as it could not match the subsidized price offered by the public sector competition.A similar scenario may unfold again as retailers' losses widen from bulk users diverting to petrol pumps.The price of diesel sold to bulk users has been hiked to Rs 122.05 per litre in Mumbai.
This compares to Rs 94.14, a litre price of the same fuel sold at petrol pumps.In Delhi, diesel costs Rs 86.67 a litre at the petrol pump, but for bulk or industrial users, it is priced at about Rs 115.Despite a surge in global oil and fuel prices, PSU oil companies have not raised retail prices of petrol and diesel since November 4, 2021, a move seen as aiding the Bharatiya Janata Party (BJP) in crucial state assembly elections.Prices were supposed to align with cost after counting votes on March 10, but the subsequent start of the second half of the Budget Session meant that the price increases didn't happen.Private fuel retailers like Nayara Energy, Jio-bp and Shell were forced to hold petrol and diesel prices as they would have lost customers if rates at their petrol pumps were higher than those of Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).But now, the PSU retailers have hiked rates for bulk users such as state bus fleets and malls and airports that use diesel to generate backup electricity.There is hardly any bulk or industrial petrol user; diesel is widely used in industries.The vast difference of about Rs 25 per litre between the bulk user rate and petrol pump price has prompted bulk users to refuel at petrol pumps rather than book tankers directly from oil companies.This has led to widening losses of oil companies, already bleeding from selling petrol and diesel at way below the cost.While Nayara Energy did not reply to an email sent for comments, Jio-bp -- the fuel retail joint venture of Reliance and UK's bp -- said, "there is a massive surge of demand at fuel stations (retail outlets) due to increased delta of Rs 25 per cent between the retail and industrial price of diesel, leading to heavy diversion of bulk diesel (direct customers) to retail outlets." "There is also a hefty lifting of fuel by dealers and B2B - B2C customers, who have advanced their purchases, to top up their tanks and capacities in anticipation of the due price increase.
Due to this immediate surge, there have been recording sales in March 2022, which is putting strain on the entire logistics and supply infrastructure," Jio-bp spokesperson said.The spokesperson added that this is further exacerbated by a shortage of Tank Trucks and rakes due to a sudden surge in demand along with limited availability of TT crew during the festive period across the industry.While private retailers have not disclosed sales, PSU retailers have sold 3.53 million tonnes of diesel from March 1 to 15, up 32.8 per cent from a month earlier.
The sales were 23.7 per cent higher year-on-year and 17.3 per cent higher than sales on March 1-15, 2019.Last week, Oil Minister Hardeep Singh Puri said that fuel sales had jumped 20 per cent due to hoarding in anticipation of price increase, but sources insisted the sales also increased because of bulk users queuing at petrol pumps.A Jio-bp spokesperson said that despite challenges, Reliance is fully committed to meeting its retail customers' demand.While Nayara has 6,510 petrol pumps in the country, Jio-bp has 1,454.
PSUs control 90 per cent of the 81,699 petrol pumps in the country.In 2008, PSU retailers were paid government subsidies for selling petrol and diesel at below cost, but private retailers were kept out of such a scheme.
This time around, PSU retailers have been asked to square up their losses from inventory gains and higher refining margins they are earning now.
But private retailers do not have refineries to cover up for retail losses.