Diesel price for bulk consumers rose to ₹25/litre; private retailers eye closure

Hardest hit are private retailers such as Nayara Energy, Jio-bp and Shell, which have so far refused to cut any volumes despite a surge in sales

Hardest hit are private retailers such as Nayara Energy, Jio-bp and Shell, which have so far refused to cut any volumes despite a surge in sales

The price of diesel sold to bulk consumers has risen by around £25 a liter in line with a nearly 40% rise in international oil prices, but retail prices at pumps remain unchanged, sources said.

Gasoline pump sales rose by a fifth this month after bulk consumers like bus fleet operators and shopping malls queued up at gas stations to buy fuel instead of the usual ordering direct from oil companies, adding to retailers’ losses.

Hardest hit are private retailers such as Nayara Energy, Jio-bp and Shell, which have so far refused to cut any volumes despite a surge in sales. But now closing pumps is a more viable solution than continuing to sell more fuel at prices that have been on hold for 136 days, three sources with direct knowledge of the development said.

In 2008, Reliance Industries had closed all of its 1,432 dispensers in the country after sales plummeted to almost zero, unable to match the subsidized price offered by public sector competition.

A similar scenario could unfold again as retailers’ losses mount as they divert bulk consumers to gas pumps, they said.

The price of diesel sold to bulk consumers has been raised to £122.05 per liter in Mumbai. This equates to a liter price of £94.14 for the same fuel sold at pumps.

In Delhi, diesel is £86.67 per liter at the pump, but for mass or industrial users the price is around £115.

PSU oil companies have not increased retail prices for gasoline and diesel since November 4, 2021, despite a surge in global oil and fuel prices, a move seen as supporting the Bharatiya Janata Party (BJP) in the crucial state assembly elections.

Prices were supposed to adjust to costs after votes were counted on March 10, but the subsequent start of the second half of the budget session meant the price hikes didn’t happen.

Private fuel distributors such as Nayara Energy, Jio-bp and Shell have been forced to maintain petrol and diesel prices as they would have lost customers if prices at their pumps were higher than those of Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

But now PSU retailers have raised prices for bulk consumers like state bus fleets and shopping malls and airports, which use diesel to generate backup power, sources said.

There are hardly any mass or industrial consumers of gasoline, diesel is widely used in industry.

The large difference of around £25 per liter between the bulk consumer price and the pump price has prompted bulk consumers to fill up at pumps rather than book tankers directly with oil companies, they said.

This has led to mounting losses for oil companies, already bleeding from selling gasoline and diesel well below cost.

While Nayara Energy did not respond to an email sent for comment, Jio-bp – the fuel retail joint venture of Reliance and bp’s UK retail and industrial price diesel – led to heavy diversion of diesel into large ones Volumes (direct customers) to retail outlets.” “Also, retailers and both B2B and B2C customers who have frontloaded their shopping to fill up their tanks and capacity in anticipation of an overdue price increase are picking up a lot of fuel. Due to this immediate increase, there were record sales in March 2022, which puts a strain on the entire logistics and supply infrastructure,” said Jio-bp’s spokesman.

This is further exacerbated by the shortage of tanker trucks and rakes due to the sudden surge in demand along with the limited availability of TT crew during the festive period across the industry, the spokesman added.

While private retailers didn’t announce any sales, PSU retailers sold 3.53 million tons of diesel from March 1-15, up 32.8% from the previous month. Sales were 23.7% higher than last year and 17.3% higher than sales for March 1-15, 2019.

Oil Minister Hardeep Singh Puri said last week that fuel sales were up 20% on hoarding in anticipation of a price hike, but sources insisted sales were also up as bulk users queued at pumps.

A Jio-bp spokesman said that despite the challenges, Reliance is fully committed to meeting the demand of its retail customers.

While Nayara has 6,510 pumps nationwide, Jio-bp has 1,454. Power supplies control 90% of the 81,699 dispensers in the country.

In 2008, PSU retailers received government subsidies for selling below-cost gasoline and diesel, but private retailers were excluded from such a program. This time, PSU retailers have been asked to offset their losses with inventory gains and higher refining margins they are now earning. But private retailers don’t have refineries to cover retail losses.

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