Dual pricing for bulk and retail consumers of diesel has not gone down well with the industry. The hike in bulk diesel price by up to Rs 25 per litre is comparatively much higher than Rs 0.80/litre hike announced for retail fuel on Tuesday.
According to sources, private retail operator Reliance’s Jio-bp has already cut supplies of fuel to retail outlets by 50%. It would focus on exports to garner higher margins. Jio-bp and Nayara Energy may be forced to shut their retail outlets like they did in 2008 if the auto fuel prices are not hiked in alignment with under-recoveries.
Historically, bulk prices are offered at a lower rate compared with retail prices and helps them secure their needs. However, the latest hefty hike for bulk consumers is likely to have an adverse effect on sate-run road transport corporations, commercial establishments, malls, etc, who buy bulk diesel to meet daily operation needs.
Diesel sales constitutes roughly 40% of the total petroleum product sales by OMCs where bulk diesel sales constitutes roughly 15-18% of total diesel sales. While OMCs are expected to make some recovery on their marketing margins with the price hike, the bulk buyers are queuing up at the retail outlets to maintain their operational viability.
Road transport corporations are staring at huge losses and operational viability issues following the bulk price hike. FE reported on March 22 that Maharashtra State Road Transport Corporation and Brihan Mumbai Electric Supply and Transport undertaking are staring at annual losses of Rs 240 crore and Rs 30 crore, respectively, due to the bulk price hike.
Reduction in excise duty and VAT, and staggered price hike is what the industry is looking forward that will bring some semblance of regularity in auto fuel prices, and help bulk buyers to revert to their old ways.
