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Bulk users throng retail outlets for diesel cheaper by Rs 25 a litre, says RIL

An impending rise in fuel prices has led customers, both bulk and retail, buy oil in advance, translating into a surge in sales this month, and putting the entire supply chain under pressure, RIL says

March 21, 2022 / 02:18 PM IST
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Bulk buyers are turning to retail outlets after a hike made bulk diesel costlier by Rs 25 a litre than the retail prices, which remained unchanged for four months, Reliance Industries Ltd said in response to a query from Moneycontrol.

The hike in bulk diesel prices has pushed buyers to retail outlets, where prices remained unchanged for four months, said in response to a query from Moneycontrol.

An impending rise in fuel prices has led customers, both bulk and retail, buy oil in advance, translating into a surge in sales this month, and putting the entire supply chain under pressure, RIL said.

“There is a massive surge of demand at fuel stations (retail outlets) due to increased delta of around Rs 25 per litre between retail and industrial price of diesel, leading to heavy diversion of bulk HSD (direct customers) to retail outlets. There is also a very heavy lifting of fuel by dealers and both B2B and B2C customers, who have advanced their purchases, to top up their tanks and capacities in anticipation of price increase which is overdue,” RIL said.

The bulk high speed diesel (HSD) prices, which is the price at which industrial and commercial consumers buy the fuel from the oil marketing companies, was about Rs 2-4 a litre cheaper than retail prices. The retail fuel prices remained unchanged through the last four month despite a steep rise in crude oil prices.

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Tuesday, 16th August, 2022

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Oil industry players told Moneycontrol that the most recent increase in bulk diesel prices on March 16 has widened the gap between the two, effectively making retail diesel cheaper by Rs 25 a litre.

“Due to this immediate surge, there has been record sales in Mar 2022, which is putting strain on the entire logistics and supply infrastructure. This is further exacerbated by shortage of tank trucks (TT) and rakes due to sudden surge in demand along with limited availability of TT crew during the festive period across the industry,” RIL said.

Industry is rife with speculations that private fuel retailers, like Jio-bp, Nayara Energy, and Shell will have to revisit their business strategy and may even consider closure of some pumps as their inability to pass on the burden of the increase in crude oil prices to consumers threatens the financial viability of these outlets.

“In spite of the challenges mentioned above, Reliance is fully committed to meet the demand of its retail customers,” RIL commented.

The company said that it is carrying out exports as per business as usual to meet its contractual requirements.

State-run OMCs Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Ltd have not revised the retail prices of fuel for a record 136 days. In the same period, crude oil prices have gone up by around 40 percent. The private retailers are faced with a challenge as they cant increase the prices while their state-run counterparts leave it unchanged, but at the current prices their margins are under pressure.

In 2002, private companies like Reliance, Essar Oil (now Nayara Energy) and Shell captured close to 15 percent of the retail market. But they faced stiff competition from the subsidised prices offered by the state run oil marketing companies, which made business unviable.

This led to RIL exiting the business while Shell and Essar scaled it down significantly. It was only after 2014 when the government deregulated diesel prices that private sector companies started expanding their fuel retail business.

RIL and bp have a joint venture for Indian fuels and mobility business that runs fuel retail stations under the ‘Jio-bp’ brand. The joint venture has around 1,400 fuel retail outlets and aims to expand its network to 5,500 over the next five years.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Rachita Prasad
first published: Mar 21, 2022 01:20 pm
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