Pay up first, tank up later; at a time of crunch, that's the message from state-run oil marketers to fuel stations.
Oil marketing companies (OMCs) have suspended fuel on credit to limit offtake by retail outlets, four people aware of the development said, as the closure of Iran's Strait of Hormuz roils crude supply chains worldwide. While Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL) began insisting on advance payments from last week, Indian Oil Corp. Ltd (IOCL) halted its five-day revolving credit policy on Monday, the people said on condition of anonymity.
The move gains significance since the three OMCs serve the majority of India's nearly 100,000 retail fuel pumps. Apart from the fall in offtake by petrol pumps, agriculture and industrial buyers who purchase fuel on credit may also take a blow. The West Asia war has choked off around 40% of crude supplies for India, the world’s third-largest oil consumer, where petro-product demand is expected to touch 250.8 million tonnes in fiscal year 2027 FY27.
While the Union petroleum ministry and the oil marketers did not respond to queries, multiple fuel distributors confirmed the development.
Credit options
Uday Lodh, national president of the Consortium of Indian Petroleum Dealers (CIPD), who earlier was the president of the Federation of All Maharashtra Petrol Dealers Association (Fampeda), said all three state-run oil marketing companies have started seeking advance payments. Earlier, these companies offered some credit lines stretching for a few days, he said. CIPD represents about 30,000 petrol pumps in the country, and is one of the three national level bodies for petroleum dealers.
OMCs offer various credit facilities. One is draft on delivery, where the dealer pays at the end of every day for the purchase made earlier in the day; and the other is revolving credit, under which pumps get fuel on credit for three to five days and pay on the sixth day. Both facilities are currently halted, fuel outlets said. There is a third facility—electronic dealer finance—where a bank issues a letter of comfort to the OMC on behalf of the outlet to supply fuel for 15-30 days. This facility, however, is continuing as of now. The credit model helps retailers procure higher volumes of fuel. In turn, the retailers also give fuel on credit to regular bulk buyers like transporters in some cases.
Dealers in the national capital were expecting the change for several days, said Nischal Singhania, president of the Delhi Petrol Dealers' Association of 400 outlets. "The primary focus of the OMCs may be the retailers who have a record of defaulting. Apart from ensuring a lower-than-usual offtake due to the need for upfront payment, the move is also aimed at ensuring economic prudence in the current times," he said.
Private blues
According to Monty Sehgal, spokesperson for the Petrol Pump Dealers Association Punjab, some private fuel marketers are now operating two shifts in several places instead of the usual three. According to Fampeda's Lodh, "they are operating only one machine at night, with all but one light switched on at the pump."
Reliance BP Mobility Ltd’s Jio-bp, Rosneft-backed Nayara Energy Ltd and Shell India Ltd operate around 9,400 retail pumps in India. Nayara and Shell declined to comment. A Jio bp spokesperson said the company is focused on ensuring that all outlets are "fully operational and adequately stocked".
Fuel pumps which sell bulk fuel on credit to buyers in agriculture, transport and industries will find it hard to serve them, Sehgal of Petrol Pump Dealers Association Punjab said.
Bulk pain
"There are large sums of credit which are due towards the dealers from these bulk buyers. We generally require a few months' time to recover that, and only then it would have been feasible to run operations smoothly without the credit facility. In states like Punjab and Haryana and some industrial clusters in the National Capital Region, these bulk buyers form a significant portion of fuel pump sales. This may bring down our daily consumption significantly," Sehgal said.
A former petroleum secretary said on condition of anonymity that during times of volatility, demand would increase, and OMCs may look at getting their dues, as an immediate shortage of petrol and diesel is not expected.
The government maintains that the country has adequate supplies of crude and the transport fuels—petrol and diesel. In a statement on Sunday, the ministry said all refineries are operating at high capacity and maintaining adequate crude oil inventories.
"Our country remains self-sufficient in the production of petrol and diesel and, no imports of petrol and diesel are required to meet domestic demand. No cases of fuel dry-outs have been reported at retail outlets by oil marketing companies, and supplies of petrol and diesel continue to be maintained regularly."