Bulk buyers of diesel have turned to getting their fill from retail fuel outlets after a ₹25 per litre hike in bulk contract prices for the transportation fuel. While the rise in diesel bulk prices was necessitated by the 40% rise in international crude oil prices, retail prices of petrol and diesel are yet to be hiked after being frozen for four months.
Petrol pumps have seen a rise in sales as bulk consumers, like state transportation corporations and malls, lined up to buy the cheaper diesel, instead of procuring it directly from oil companies under their bulk contracts. State-run oil marketing companies have not increased retail prices for petrol and diesel since November 4 despite rising global crude prices, but have hiked prices for direct sales of industrial or bulk clients in line with terms of their contracts.
“There is a massive surge of demand at fuel stations due to increased delta of ₹25 a litre between retail and industrial price of diesel, leading to heavy diversion of bulk diesel customers to retail outlets,” Reliance BP Mobility Limited told a news agency.
“There is also a very heavy lifting of fuel by dealers and both B2B (business to business) and B2C (business to customers), who have advanced their purchases, to top up their tanks and capacities in anticipation of price increase which is overdue. Due to this immediate surge there have been record sales in March 2022, which is putting strain on the entire logistics and supply infrastructure,” it further added.
As of now, diesel to retail buyers costs ₹94.14 a litre in Mumbai, but is being sold at ₹122.05 per litre to bulk buyers. In Delhi, the fuel costs ₹86.67 a litre at petrol pumps, but bulk consumers or industrial users have to shell out ₹115 per litre for it.
Petrol and diesel prices have not changed for an unprecedented 136 days, as they were frozen ahead of elections to five state assemblies. The rates were expected to be hiked, in line with the crude oil prices, after the results were declared on March 10, but it has not happened yet. Meanwhile, private retailers like Nayara Energy, Jio-bp and Shell are forced to hold the rates even as they suffer losses, or they will lose customers to public sector retailers. Nayara runs 6,510 petrol pumps in the country, while Jio-bp has 1,454. Public sector retailers control 90% of the 81,699 petrol pumps in the country.
With the petrol pumps offering diesel at ₹25 per litre less than the bulk contracts, consumers like malls, state bus fleets, airports, etc. have diverted to the former source. This has led to widening losses for oil companies who are already suffering from low prices for petrol and diesel as compared to the high cost.
Retailers, especially private ones, have started to feel the burn from the sustained pressure, presenting closure as a better option than continuing to sell at frozen rates. Reliance Industries had shut its 1,432 petrol pumps in the country in 2008 after it could not match the subsidised prices offered by state-run fuel retailers.
In 2008, the government paid subsidies to PSU retailers for selling petrol and diesel at below cost, but private retailers were not included in this scheme. This time around, PSU retailers have been asked to square up their losses from inventory gains and higher refining margins they are earning now. But private retailers do not have refineries to cover up for retail losses.
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