The price of diesel sold to wholesale users has increased by around ₹25 per liter in line with an increase of almost 40% in international oil prices, but retail prices at petrol pumps remain unchanged, sources said .
Petrol pump sales jumped by a fifth this month after bulk users such as bus fleet operators and shopping malls lined up at berths to buy fuel rather than the usual practice of order directly from oil companies, increasing retailers’ losses.
Worst hit are private retailers such as Nayara Energy, Jio-bp and Shell, which have so far refused to cut any volume despite an increase in sales. But now shutting pumps is a more viable option than continuing to sell more fuel at prices frozen for a record 136 days, three sources with direct knowledge of the development said.
In 2008, Reliance Industries closed all of its 1,432 gas pumps nationwide after sales plummeted to near zero because they could not match the subsidized price offered by public sector competition.
A similar scenario could play out again as retailer losses widen as wholesale users are diverted to gas pumps, they said.
The price of diesel sold to bulk users has been increased to ₹122.05 per liter in Mumbai. This compares to the price of ₹94.14 per liter of the same fuel sold at petrol pumps.
In Delhi, diesel costs ₹86.67 per liter at the gas pump, but for bulk or industrial users it costs around ₹115.
Assembly elections
PSU oil companies have not raised retail gasoline and diesel prices since November 4, 2021 despite a spike in global oil and fuel prices, a move seen as helping the Bharatiya Janata Party (BJP) in crucial elections to the Assembly.
Prices were supposed to start matching costs after the votes were counted on March 10, but the start of the second half of the ensuing budget session meant that price increases did not happen.
Private fuel retailers like Nayara Energy, Jio-bp and Shell have been forced to maintain petrol and diesel prices because they would have lost customers, if prices at their petrol pumps were higher than those at the Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
But now power pack retailers have hiked rates for large users such as state bus fleets, shopping malls and airports that use diesel to generate emergency power, officials said. sources.
The large difference of about ₹25 per liter between the bulk usage rate and the price at the gas pump has prompted bulk users to refuel at gas pumps rather than booking tankers directly from the companies oil companies, they said.
This has led to mounting losses for oil companies, which are already bleeding from selling petrol and diesel well below cost.
Strong demand
While Nayara Energy did not respond to an email sent for comment, Jio-bp – the fuel distribution joint venture of Reliance and Britain’s bp – said “there is a massive increase in demand in service stations [retail outlets] due to increase in delta of ₹25 between retail price and industrial price of diesel resulting in large diversion of bulk diesel [direct customers] at the points of sale.” “There is also a very heavy lifting of fuel by dealers and B2B and B2C customers, who have advanced their purchases, to fill their tanks and capacities in anticipation of the increase prices that are expected. Due to this immediate increase, there were record sales in March 2022, which puts a strain on the entire logistics and supply infrastructure,” the Jio-bp spokesperson said.
This situation is further exacerbated by the shortage of tankers (TT) and rakes due to a sudden increase in demand as well as the limited availability of TT crew during the holiday season in the industry, added the spokesperson.
While private retailers did not disclose their sales, PSU retailers sold 3.53 million tonnes of diesel from March 1-15, up 32.8% from a month earlier. Sales were up 23.7% year-over-year and 17.3% from March 1-15, 2019 sales.
Oil Minister Hardeep Singh Puri said last week that fuel sales jumped 20% due to hoarding ahead of the price hike, but sources insisted sales also rose in due to bulk users queuing at gas pumps.
A Jio-bp spokesperson said that despite the challenges, Reliance was 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% of the country’s 81,699 gas pumps.
In 2008, PSU retailers received government subsidies to sell gasoline and diesel below cost, but private retailers were kept out of such a program. This time around, PSU retailers have been asked to offset their losses due to inventory gains and the higher refining margins they are currently earning. But private retailers do not have refineries to cover retail losses.
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