Hardest hit are private retailers such as Nayara Energy, Jio-BP and Shell, which have so far refused to curtail volume despite strong sales surges. But now shutting down pumps is a more viable solution than continuing to sell more fuel at rates frozen for 136 days, three sources with direct knowledge of the development said.
In 2008, Reliance Industries had closed all of its 1,432 gas pumps in the country after sales fell to nearly zero as it failed to match the subsidized price of its public sector competition. A similar scenario could unfold again as retailers’ losses grow as bulk consumers are diverted to gas pumps, they said.
The price of diesel sold to large consumers has been increased to Rs 122.05 per liter in Mumbai. This compares to Rs 94.14 per liter price of the same fuel sold at petrol pumps.
In Delhi, diesel costs Rs 86.67 per liter at the petrol pump, but for bulk or industrial users, it costs about Rs 115. PSU oil companies have not increased sales prices of petrol and diesel since Nov 4, 2021, despite a sharp rise in the global oil and fuel prices, a move that would aid the Bharatiya Janata Party (BJP) in crucial state assembly elections.
After the counting of the votes on March 10, prices should be brought in line with costs, but the subsequent start of the second half of the budget session meant that the price increases did not go through.
Private fuel distributors such as Nayara Energy, Jio-bp and Shell were forced to hold on to gasoline and diesel prices because they would have lost customers if the rates at their gas pumps exceeded those of Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd ( BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). But now PSU retailers have raised rates for high-volume consumers such as state bus fleets and shopping malls and airports that use diesel to generate backup electricity, sources said.
There is hardly any bulk or industrial user of gasoline, diesel is widely used in industry. The large difference of about Rs 25 per liter between the bulk consumer tariff and the price of a petrol pump has led large consumers to refuel at petrol pumps instead of booking tankers directly with oil companies, they said. This has led to mounting losses for oil companies, which were already bleeding from selling petrol and diesel below cost.
Although Nayara Energy did not respond to an email sent for comment, Jio-BP – the fuel retail joint venture of Reliance and UK BP – said that “there has been a massive increase in demand at service stations (stores) as a result of a larger delta of Rs 25 percent between the retail and industrial price of diesel, leading to a major diversion of bulk diesel (direct customers) to retail.
“There is also a very heavy load on fuel by dealers and both B2B and B2C customers, who have brought forward their purchases, to top up their tanks and capacities in anticipation of a price increase that is overdue. record sales in March 2022, putting pressure on the entire logistics and supply infrastructure,” said Jio-BP spokesman.
This is compounded by shortages of tankers and rakes due to the sudden surge in demand and limited availability of TT staff during the holiday season across the industry, the spokesman added.
While private retailers have not disclosed sales, PSU retailers sold 3.53 million tons of diesel from March 1 to 15, 32.8 percent more than a month earlier. Sales were 23.7 percent higher year on year and 17.3 percent higher than sales in March 1-15, 2019. Oil Minister Hardeep Singh Puri said last week that fuel sales were up 20 percent due to hoarding in anticipation of the price rose, but sources claimed sales also increased as large consumers queued at gas pumps.
A Jio-BP spokesperson said that despite the challenges, Reliance is fully committed to meeting the demand of its retail customers.
While Nayara has 6,510 gas pumps in the country, Jio-BP has 1,454. PSUs control 90 percent of the country’s 81,699 gas pumps.
In 2008, PSU retailers received government subsidies to sell petrol and diesel below cost, but private retailers were excluded from such a scheme. This time, PSU retailers have been asked to offset their losses from inventory gains and higher refining margins they are now earning. But private retailers don’t have refineries to cover retail losses.
This post Diesel price for bulk users increased by Rs 25/litre
was original published at “https://www.bloombergquint.com/business/fuel-price-hike-diesel-price-for-bulk-users-hiked-by-rs-25litre”