Many cutting operations resort to purchasing from retail pumps where rates are lower.
Road haulage companies (RTCs), run by state governments, are staring at huge losses and undermining their operational viability as a result of the soaring diesel prices last week for heavy consumers like them. Unable to pass on the recent increase in the cost of purchasing crude oil due to a lack of tacit government approval, the oil marketing firms raised prices for bulk consumers in an effort to reduce under-collections on sales of automotive fuels. .
To solve the problem, RTCs are weighing several options, including reducing their operations and increasing retail fuel purchases as far as feasible. At least one of them – the Kerala RTC – has already approached the Supreme Court to seek relief.
The shift from bulk buying to retail outlets is also expected to negatively impact private retail operators such as Jio-bp, a RIL company, and Nayara Energy, which operate 1,500 and 6,000 outlets, respectively. These companies have been unable to increase the selling price of petrol and diesel more than PSU retailers since November, as the state-run OMCs froze prices. Since these companies are unlikely to close the outlets, a possible increase in sales volume after the bulk consumers of OMCs also become retail buyers would mean that their underfunding would be higher.
A RIL spokesperson said there is a huge increase in demand at retail gas stations due to a wider delta of about Rs 25/litre between retail and industrial diesel prices.
“There is also a very heavy load on fuel from 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 hike that is overdue. This immediate increase has led to record sales in March, which is putting pressure on the entire logistics and supply infrastructure,” he said. However, the spokesperson added that despite the challenges, Reliance is fully committed to meeting the demand of its retail customers. The company also exports in a “business-as-usual” manner to meet its contractual requirements, he added.
Maharshtra State Roadways Transport Corporation (MSRTC) and Brihan Mumbai Electric Supply and Transport (BEST) company have estimated that their operating costs will increase annually by Rs 240 crore and Rs 30 crore from the Rs 25 per liter increase in bulk announced alone diesel price by the OMCs last week.
Shekhar Channe, deputy chairman and director of MSRTC, told FE that on Friday the RTCs issued a directive to fleet operators stating that all buses in the 250 depots in Maharshtta will now fill their tanks at the nearest outlets. “We have assigned our employees at the nearest sales outlets to coordinate the fuel delivery for our buses. It is impossible for us to buy in bulk given the additional cost of Rs 66 lakh per day,” Channe said.
MSRTC requires about 0.3 million liters of diesel per day. It owns a fleet of 14,000 buses, but due to a state-level strike in recent months, only 5,000 buses are currently running, a scenario it could help mitigate the impact of higher fuel costs. However, Channe believes it is a temporary phenomenon and that things will soon change for the better.
A BEST spokesperson said: “We are looking at various options, including retail buying, as we cannot pass on the price increase through rate hikes at this time. We are also looking to get some concessions from the government in the meantime, but nothing concrete has emerged yet.”
PSUs review bulk diesel rates every two weeks. The price over the past two weeks in the metropolitan area of Mumbai increased by Rs 19 per liter to Rs 122 per liter and outside the metropolitan area of Mumbai it increased by Rs 19/litre to Rs 120 per liter.
The bulk operators queuing at the points of sale has led to an increase in point of sale sales. PSU retailers sold 3.53 million tons of diesel between March 1 and 15, a sequential jump of 32.8% and 23.7% year on year.
The Kerala RTC appealed to the Supreme Court on February 25 against an earlier increase in diesel prices of Rs 6.46 per litre. The increase was expected to increase the liability of financially stressed roads by Rs 16 lakh per day.
This post Road haulage companies face huge losses as oil marketing firms raise bulk diesel tariffs was original published at “https://www.financialexpress.com/market/commodities/road-transport-corporations-face-huge-losses-as-oil-marketing-companies-hike-bulk-diesel-rates/2467193/”