Selling diesel at Rs 20-25/ltr loss, petrol at Rs 14-18/ltr loss: Private retailers to authorities

Selling diesel at Rs 20-25 a litre beneath price and petrol at Rs 14-18 per litre beneath price, because of a value freeze regardless of hovering crude charges is unsustainable, an business physique representing personal gas retailers like Jio-bp and Nayara Energy has informed the Oil Ministry and has sought its intervention to create a viable funding setting.

On June 10, the Federation of Indian Petroleum Industry (FIPI), which in addition to personal gas retailers additionally counts state-owned corporations comparable to IOC, BPCL and HPCL as its members, wrote to the Petroleum Ministry saying losses on petrol and diesel will restrict additional investments in retailing enterprise.

International crude oil and product costs have risen sharply to a decade excessive however state-owned gas retailers, who management 90 per cent of the market, have frozen petrol and diesel costs at charges equal to two-third of the price.

This has left personal gas retailers like Jio-bp, Rosneft-backed Nayara Energy and Shell to both elevate costs and lose prospects, or to curtail gross sales to chop losses.

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Retail promoting costs for petrol and diesel had been held for a report 137 days between early November 2021 and March 21, 2022 regardless of hovering costs.

“With effect from March 22, 2022, the retail selling prices were revised on 14 occasions at an average of 80 paise per litre per day, leading to an overall increase of Rs 10 per litre on both petrol and diesel. However, the under-recoveries (losses) continue to be very high in a range of Rs 20-25 per litre for diesel and Rs 14-18 per litre for petrol,” FIPI director normal Gurmeet Singh wrote.

While retail charges have been on a freeze since April 6, the value of diesel bought to bulk customers like state transport undertakings elevated according to the rise in worldwide oil costs.

“This resulted in rapid diversion of bulk diesel (direct consumers) sales to retail outlets amounting to widening of losses incurred by private fuel retailing companies,” FIPI wrote.

“We urgently seek your support in matters related to retail selling pricing of petrol and diesel, as all private oil marketing companies, who are making investments in the retailing sector are experiencing a difficult investment environment,” it stated.

Losses, it stated, will restrict their means to “make further investments as well as to operate and expand their networks.” “The stakeholders of private fuel retailing companies, namely dealers (including prospective dealers), transporters, direct and indirect employees and end-consumers also inadvertently bear the impact of under-recoveries,” Singh wrote.

FIPI sought the ministry’s intervention to offer some reduction to gas retailers, create a extra viable funding setting for personal gas retailers and assist growth of the best setting and ecosystem to draw additional investments and job creation within the sector.

“The continuing uncertainty around the oil and gas sector and delay in equitable policy implementation like following free market determined pricing principles, providing access to infrastructure and bringing oil and gas under GST could potentially discourage foreign investors to make investments,” it stated.

“With no triggers for reduction in prevailing crude and product cracks, the under-recovery situation shall only aggravate for the fuel retailing companies.” Higher costs at personal firm retailers and a few of them curbing gross sales had in current days led to heavy site visitors at PSU petrol pumps, resulting in a few of them in states like Madhya Pradesh, Rajasthan, Karnataka and Gujarat operating out of inventory.

To guarantee personal corporations don’t curtail operations, the federal government on June 17, expanded the scope of Universal Service Obligation (USO), mandating licensed entities to keep up petrol and diesel gross sales in any respect petrol pumps, together with in distant areas, for specified working hours.

“The government has now expanded the horizon of USO by including all retail outlets (petrol pumps) including remote area ROs under their ambit,” the oil ministry had stated in a press release on Friday.

After this, entities which were granted licences to retail petrol and diesel can be “obligated to extend the USO to all the retail consumers at all the retail outlets.” Failure to fulfill norms can result in the cancellation of licences.

The USOs embrace sustaining provides of petrol and diesel all through the desired working hours and of specified high quality and amount; making out there minimal amenities as specified by the central authorities, the assertion had stated.

Moreover, sustaining minimal stock ranges of petrol and diesel as specified by the Centre every now and then; offering providers to any individual on demand inside an affordable time frame and on a non-discriminatory foundation and guaranteeing availability of gas to prospects at affordable costs, are additionally a part of USOs.