Private retailers selling gasoline, diesel at a loss, seek government intervention to create a viable environment

An industry body representing private fuel retailers such as Jio-bp and Nayara Energy told the oil ministry that they sell diesel at Rs 20-25 per liter below cost and petrol at Rs 14-18 per liter below cost, as a result the freezing of prices despite rising crude oil prices is unsustainable.

The industry body sought its intervention to create a viable investment environment.

The Federation of Indian Petroleum Industry (FIPI), which in addition to private fuel retailers also counts state-owned companies such as IOC, BPCL and HPCL as its members, wrote to the oil ministry on June 10, saying it would limit petrol and diesel losses further. retail investment.

International crude oil and product prices rose sharply to their highest level in a decade, but state fuel retailers, which control 90 percent of the market, froze gasoline and diesel prices at levels equivalent to two-thirds of the price.

This has led private fuel traders such as Jio-bp, backed by Rosneft’s Nayara Energy and Shell, to either raise prices and lose customers, or cut sales to reduce losses.

Retail sales prices for petrol and diesel remained at a record 137 days between early November 2021 and 21 March 2022, despite rising prices.

“With effect from 22 March 2022, retail sales prices have been revised 14 times at an average of 80 pips per liter per day, resulting in an overall increase of Rs 10 per liter for both petrol and diesel.

“However, insufficient recovery (losses) remain very high in the range of 20-25 rupees per liter for diesel and 14-18 rupees per liter for petrol,” wrote FIPI Director General Gurmit Singh.

While retail prices have been frozen since April 6, the price of diesel sold to wholesale consumers, such as state-owned transport companies, is rising in line with rising international oil prices.

“This has led to a rapid diversion of bulk sales of diesel fuel (direct customers) to retail outlets, leading to an increase in losses incurred by private fuel retailers,” FIPI reported.

“We urgently seek your support on issues related to the retail pricing of petrol and diesel, as all private oil marketing companies investing in the retail sector are experiencing a difficult investment environment,” the statement said.

The losses, they said, would limit their ability to “make additional investments as well as operate and expand their networks.”

“Stakeholders from private fuel retailers, namely dealers (including prospective dealers), carriers, direct and indirect employees and end-users, are also inadvertently affected by insufficient recovery,” Singh wrote.

FIPI sought the intervention of the Ministry to provide some relief to fuel traders, to create a more viable investment environment for private fuel retailers and to support the development of the right environment and ecosystem to attract more investment and create jobs in sector.

Ongoing uncertainty over the oil and gas sector and delays in fair policy implementation, such as adherence to free market pricing principles, access to infrastructure and placing oil and gas under the GST, could potentially discourage foreign investors from make investments, “the report said.

“Without triggers to reduce the prevailing cracks in crude oil and products, the situation with insufficient recovery will only worsen for fuel retailers.”

Higher prices at the outlets of private companies and some of them the restriction of sales in recent days has led to heavy traffic at PSU gas stations, which has led to depletion of some of them in states such as Madhya Pradesh, Rajasthan, Karnataka and Gujarat.

To ensure that private companies do not cut back on operations, the government extended the universal service obligation (USO) on June 17 by requiring licensees to maintain gasoline and diesel sales at all gas stations, including in remote areas, for a specified period. work time.

“The government has already broadened USO’s horizons to include all retail outlets (gas stations), including ROs in remote areas, within their scope,” the oil ministry said in a statement Friday.

Entities that have received licenses to retail petrol and diesel will then be “obliged to extend the USO to all retail consumers in all outlets”.

Failure to comply may result in revocation of licenses.

USO includes maintaining the supply of gasoline and diesel fuel during the specified working hours and with a certain quality and quantity; provision of minimum facilities as specified by the central government, the statement said.

In addition, periodic maintenance of minimum levels of petrol and diesel stocks, as determined by the Center; providing services to any person upon request within a reasonable period of time and on a non-discriminatory basis and ensuring the availability of fuel to customers at reasonable prices are also part of the USO.

With PTI inputs

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