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Petrol pump dealers caution govt against OMCs rationing retail supply to curb their losses

Dealers said they have been asked to restrain sale to new customers as oil marketing companies are losing Rs 28 per litre on diesel and Rs 8 per litre on petrol.

May 21, 2022 / 06:22 PM IST
 
 
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Petrol pump dealers have cautioned the Central government that oil marketing companies (OMCs) rationing fuel supply for retail sales in order to curb their losses may lead to shortage at retail outlets and cause law and order problems, a consortium of the dealers said in a letter, a copy of which is in Moneycontrol’s possession. 

The Consortium of Indian Petroleum Dealers (CIPD) said in a letter dated May 20 that dealers are being pressurised by OMCs not to sell more than usual volume through retail pumps as they are incurring losses on retail sales.   

“The reasoning given for this curtailed supply measure is that the OMCs are losing Rs 28 per litre on diesel and Rs 8 per litre on petrol. We are advised to restrain sale to new customers and  cater to only our existing customers,” the consortium said in the letter.

OMCs– Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) typically revise retail petrol and diesel prices daily, based on the rolling average of international benchmark prices over the past 15 days. While they increased prices of fuel sold to bulk consumers and aviation turbine fuel in line with the sharp rise in crude oil prices, retail prices of petrol and diesel were left unchanged for almost 137 days until March 22. 

Traditionally, bulk buyers enjoyed cheaper rates than retail consumers. But a series of increases in bulk high-speed diesel (HSD) prices even as retail prices remained unchanged has resulted in a reversal of the trend. While the retail fuel price has been revised since March 22, the gap between the retail and bulk prices remains high and has led to some bulk consumers lining up at retail stations to buy cheaper fuel. 

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“Officers of the OMCs have been sending WhatsApp messages saying the situation is critical and will remain to be so till RSP (retail selling price) is increased by the government. We fear the situation in the field would turn chaotic and create law and order problems which may be unsafe for the network at large,” the letter stated.

“This will also affect the channel partners' credibility. Volatility due to fear of short supplies will cause panic and thus need to be avoided,” the consortium said in the letter. 

Two senior petrol pump dealers that Moneycontrol spoke to said that the OMCs had started rationing petrol and diesel supply to petrol pumps and were keeping a close watch on the daily sales.  

“We the OMC dealers are now being pressurized by the companies to be cautious in our sale of  fuels both petrol and diesel, especially the latter, and that we should not sell more and above the  normal sale, meaning new customers namely fleet or industrial or for generators should not be  entertained. Also, loads would be supplied only with a petrol combination and not full diesel,” the letter said.  

Two of the three state-run OMCs–IOCL and HPCL– have so far reported their financial result for the quarter ended March; both made losses on retail sales on auto fuel, which led to their overall profit declining in the fourth quarter despite robust performance from their refineries. BPCL is scheduled to announce its result on May 25. 

“We request your intervention on the above and call us for a discussion to find solutions. Restoring  normal supplies is anticipated in the interim,” the letter said.  

The consortium said that several trade issues are affecting the viability of operating in business that have been communicated to the government since 2017 but remain unaddressed. They sought a meeting with the Ministry of Petroleum and Natural Gas and OMCs to resolve the issues.
Rachita Prasad heads Moneycontrol’s coverage of conventional and new energy, and infrastructure sectors. Rachita is passionate about energy transition and the global efforts against climate change, with special focus on India. Before joining Moneycontrol, she was an Assistant Editor at The Economic Times, where she wrote for the paper for over a decade and was a host on their podcast. Contact: rachita.prasad@nw18.com
first published: May 21, 2022 06:22 pm
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