New Delhi:
Petrol pumps across 24 states in the country will not purchase petrol and diesel from oil marketing companies (OMC) on 31 May 2022, Tuesday in protest of no revision in their commissions despite rising petrol and diesel prices.According to the dealer associations, the dealer margins were not revised since 2017. Though there was an agreement between OMCs and Dealer Associations that the Dealer Margins will be revised every six months.
The 22 states namely are- Tamil Nadu, Karnataka, Kerala, Telangana, Andhra Pradesh, Delhi, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Himachal Pradesh, Bihar, Assam, Meghalaya, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Tripura, Sikkim and North Bengal Dealers Association. Dealers in parts of Uttar Pradesh and Madhya Pradesh have also committed to joining the protests.
“The prices of fuel have almost doubled since 2017, hence the working capital in business has doubled leading to additional loans & bank interests thereupon,” said a statement by the dealer association.
“Evaporation losses have increased proportionately. Also, the overhead expenses like bank charges, electricity bills, salaries, etc have increased manifold during the last 5 years. Our constant demand to revise dealer commission has been overlooked by the OMCs. By doing so OMCs is making its own network financially unviable,” stated the dealer association.
The constant demand to revise dealer commission has been overlooked by the OMCs, by doing so OMCs are making their own network financially unviable.
On 22 May 2022, the Centre slashed excise duty on petrol and diesel by INR 8 and INR 6 per litre respectively resulting in a decrease in the price of petrol by INR 9.5 per litre and of diesel by INR 7 per litre.
Since June 2017 when the dynamic pricing mechanism (DPM) was put in place, excise duty has been revised 8 times, out of these 5 times excise duty reduction led to a lower retail selling price (RSP), causing loss to the dealers and 3 times excise duty was increased without changing the RSP and passing on the benefit of price rise to the OMCs. Dealers have no problem with DPM, however, it is not followed in letter & spirit.
Fuel dealers lost about INR 2,100 crore due to a sharp drop in duty over the weekend as they had paid duties for their stock but couldn’t recover it from customers. When duties rise, dealers make proportionate gains.
“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 DPM. A mechanism should be put in place to isolate the dealers from excise duty changes. Dealers cannot make a profit due to an increase in excise duty nor they should not be burdened with loss due to reduction,” it added.
Dealers’ commission is decided by a five-year-old formula that has fixed as well as variable components. On average, dealers are currently getting a commission of INR 3.78 per litre of petrol in Delhi. On diesel, it is INR 2.57 per litre. As a percentage of the retail price, the current commission is about 3.9% for petrol and 2.9% for diesel.
Currently, petrol pumps get a commission of around INR 2.90 per litre of petrol and around INR 1.85 per litre in the case of diesel. Although commissions were increased by around INR 1 a litre in 2017, “OMCs keep 40 paise of it in the name of licence fees.”
The call for protests comes just days after another dealers’ body, the All India Petroleum Dealers Association (AIPDA), said that petrol pumps would not resort to any protests as officials at the ministry of petroleum and natural gas have assured to address their issues.
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In a letter addressed to oil industry coordinator, which is BPCL, Consortium of Indian Petroleum Dealers, an association of fuel retail dealers, claimed they are under pressure to keep petrol and diesel sales under control and said it is afraid the situation may lead to fuel shortage at retail outlets and cause law and order problems.
