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OMCs see 30% drop in bulk sales since Jan 17

Source : BUSINESS_STANDARD
Last Updated: Tue, Feb 12, 2013 20:41 hrs
Oil India sees higher March quarter subsidy burden - exec

In a major jolt to the government's dual pricing policy on diesel, sales for bulk customers have dropped by at least 30 per cent since January 17, when the prices were increased. On the other hand, diesel sales through retail channels have zoomed 12 per cent during the same period.

To save about Rs 12,907 crore from the subsidy burden, the diesel price hike and decontrol steps last month were coupled with dual pricing system, through which bulk customers such as defence, railways and state transport utilities had to pay at the market price. In Delhi, while the subsidised retail prices is Rs 47.65 per litre, bulk customers are paying Rs 56.88.

According to an industry official, the move to save subsidy has backfired as there is a huge increase in subsidised retail sales since January 17. "There is a major change in the sales pattern of bulk and retail customers. Compared to the first 17 days in January, direct sales have dropped 30 per cent. On the other hand, we have seen more than a 12 per cent rise in retail sales. This is mainly because of state transport corporations shifting to retail outlets," he said.

Oil marketing companies have already raised the issue before the government.

The states that have seen a major migration to retail sales include Andhra Pradesh, Rajasthan, Karnataka, Tamil Nadu and Gujarat. "It is difficult to stop this. We cannot stop them as these consumers are directly filling to their vehicles only," a senior official from an oil marketing company said.

Of the total annual diesel consumption of 70 million tonnes (mt), bulk sales for the industry are more than 11 mt, of which, 3 mt go to defence and railways. "In the remaining 8 mt, 4 mt go to core industries. Both railways, defence and core industries will not shift to retail outlets. The major concern is regarding the remaining 4 mt, which are consumed by state transport utilities and fleet operators. A 100 per cent shift by them to retail platform may bleed the government more," the industry official added.

Dealers say not all bulk customers would be able to shift to retail outlets as a normal tanker size is 12,000 or 20,000 litres, and retailers would not be able to sell in such a big volume at one go.

When contacted, the Federation of All-India Petroleum Traders also confirmed the rapid rise in retail sales. "As per our estimates, there is an 18 per cent rise in retail sales on average across the country. Haryana has seen the biggest rise in retail sales since the dual pricing system was introduced. Retail sales in the state have increased 24 per cent since then," said Ajay Bansal, General Secretary of the federation.

Bansal said growth in retail sales in the month before dual pricing was about 15 per cent but it had now risen by 18 per cent, with some bulk users buying from retail outlets.

Through phase-wise decontrol, the government's plan was to eliminate a loss of Rs 9.60 on sale of every 1 litre by oil marketing companies. The major beneficiaries of the move are Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. They were incurring a daily revenue loss of Rs 384 crore on the sale of diesel, LPG and kerosene.

Allowing sales of bulk diesel at market price has also opened the segment for competition, with private players to become more aggressive on bulk sales. In that case, IOC could be a major loser, as it holds 78 per cent of the bulk diesel sales market.


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