Fuel retailers in 22 States to halt buying on Tuesday

They seek reimbursement of losses due to excise duty cuts and higher commissions to stay viable

May 30, 2022 07:21 pm | Updated 07:21 pm IST - NEW DELHI

A view of a petrol bunk in Hyderabad. File

A view of a petrol bunk in Hyderabad. File | Photo Credit: Nagara Gopal

Fuel pump dealers from 22 States will not buy any diesel or petrol from oil marketing companies on May 31, demanding reimbursement of the losses they incurred on the overnight excise duty reductions announced by the Centre earlier this month and a mechanism to insulate them from frequent excise duty tweaks.  

“Since June 2017, when the dynamic pricing mechanism was put in place for fuels, excise duty has been revised 8 times, with five instances of excise duty cuts leading to lower retail selling price and causing losses to dealers,” the Delhi Petrol Dealers’ Association said in a statement with counterparts from Tamil Nadu, Gujarat, Rajasthan, Maharashtra, Karnataka, Kerala, and 15 other States.

On the three occasions excise duty on petrol products was increased since 2017, the retail price was not changed and the benefit was passed on to the oil marketing companies (OMCs), they said. Apart from reimbursements from the OMCs, the dealers want future price changes to happen in line with the deregulated and dynamic pricing mechanism for fuel products.

Deregulated pricing regime

Though India has officially moved to a deregulated pricing regime for fuel products, retail prices are often put on hold by public sector oil majors who dominate the market, despite sharp changes in global oil prices. In recent months, while global crude prices shot up, fuel prices were unchanged for a long period between November 2021 and March this year, and have been frozen again since April 6.

“We demand that our losses on account of excise reduction should be reimbursed by the OMCs and future price changes should happen in line with the dynamic pricing mechanism,” the statement said. “Dealers cannot make profit due to increase in excise duty, and they should not be burdened with loss due to reduction.”

Last Friday, the Telangana Petroleum Dealers’ Association announced a plan to skip purchase of fuels from the OMCs on May 31. It said 15 other States’ dealers would do the same. By Monday, more States had joined the cause, seeking higher commissions and safeguards from the losses incurred due to tax cuts, including Andhra Pradesh, West Bengal, Punjab, Uttarakhand and the northeastern States.

Dealers’ commissions have not been revised since 2017 though there was a pact with the oil marketing firms to revise them every six months, the petrol pump operators pointed out, even though their working capital requirements have doubled as fuel prices have almost doubled since then.

“Our constant demand to revise dealer commission has been overlooked by the OMCs, and by doing so, they are making their own network financially unviable,” they stressed.

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