Oil firms to study impact of daily price revision over 3 months
Petroleum dealers are crying foul over “losses” arising from daily fuel price revisions and the state-run oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Hindustan Petroleum Corp. Ltd (HPCL), and Bharat Petroleum Corp. Ltd (BPCL)—will study the effect of the new pricing mechanism for three months before deciding on compensation for the dealers, if any, said two officials from the OMCs.
Dealers claim they have made losses of Rs400 crore since the switch to daily fuel pricing from fortnightly. Dealer associations have threatened to go on an indefinite strike from 1 August if there is no increase in margins.
“The dealers are misleading the public. The loss that they are talking about, is a notional loss. It is the expansion and contraction of working capital. For instance, if the dealer buys fuel worth Rs1 lakh from the OMCs today and the next day international rates change, he would be selling it at less than that price. But if rates go up, he would be selling at a higher price. They are our dealers and we are reviewing their demands but beyond a limit we will not entertain it,” said an OMC official, one of the two cited earlier. Both spoke on condition of anonymity.
OMCs did not reply to an email sent on Wednesday.
Dealer associations claim that nearly 53,000 retail outlets run by the OMCs have lost Rs400 crore since 15 June, when daily pricing kicked off across the country.
“In the last 15 days, the crude is going down. The basic question is of our survival. We are in very heavy loss. While the OMCs have their margin intact, our margins are suffering. We need some sort of insulation from this loss,” said Ajay Bansal, president of the All India Petroleum Dealers’ Association.
India has a total of 59,595 retail outlets in India, of which 54,607 are under the public sector OMCs, while Reliance Industries Ltd (1,400), Essar (3,499) and Shell (85) run the rest.
“The dealers are making all sorts of audacious claims. One fortnight of daily fuel pricing and there are so-called losses. Till the month of April this year, they have made gains in sales of both petrol and diesel. Only in June would their margins have suffered due to drop in international crude oil prices. The dealers can’t look at the experiment in isolation. Nobody can predict crude oil price movement. So based on that, they are making audacious claims of losses,” said a second senior official, from an another OMC.
During the first quarter of this fiscal year, crude oil price has declined 7% to $50.2 per barrel.
OMCs had first launched daily price revisions in May in five cities—Chandigarh, Jamshedpur, Puducherry, Udaipur and Visakhapatnam. IOCL monitors daily price revision round-the-clock through 87 control rooms to offer quick redressal of queries from the field.
“We have carried out studies where we found that dealers have made huge gains. Daily fuel pricing is an experiment and we would be able to see if there is any impact only after three months. We are equally concerned about the small volume dealers and we would review the margin situation in case of loses and look at compensating them,” the second official added.