Petrol Dealers Across 24 States To Not Buy Fuel On May 31

The Petrol Pump Dealers Association has announced that 70,000 outlets across 24 states will not buy fuel from oil marketing companies on May 31. At a press conference held in Delhi, the association members said that the campaign to not purchase fuel from oil companies (OMC) was over issues relating to the non-increase of dealer margins over the past 5 years and issues with losses incurred from excise duty revisions by the government.

The association said that over the past 5 years, the overheads and expenses of owning and operating petrol pumps had risen though oil companies had not raised dealer margins. The association alleged that the central government had last in 2017 hiked dealer margins following which OMCs and the dealer association had agreed to a 6 monthly dealer margin revision which had not been followed by the companies. The association said that current dealer margins stood at 2 per cent along with demanding OMCs to hike this cut to 5 per cent citing examples of pumps in the US where the margin stood at 8 per cent.

Association says dealer margins have remained at 2 per cent since 2017 though expenses have risen.

“The dealer commission is essentially a reimbursement of our expenses like salaries, electricity bills, bank charges etc which 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 are making it's own network financially unviable,” the association said in a statement.

The association highlighted that the higher expenses were pushing some smaller pumps to the verge of bankruptcy and called on OMCs to come to the table to discuss an increase in commissions. The organisation also called for OMCs to reimburse their dealer's losses incurred from excise reduction.

The association alleged that the excise duty cuts had “broken our backs” owing to losses incurred in lakhs from buying fuel at a higher price and selling at lower prices post the excise cut. The association said that the cuts in excise had been passed on to dealers who had incurred “irrecoverable losses”.

Association says that the excise duty changes has caused losses in lakhs to dealers

The association pointed out that since June 2017 when the dynamic pricing mechanism had been put in place excise duty had been revised on eight occasions. On five of these occasions, the duty had been reduced leading to a lower retail selling price (RSP) while on the remaining occasions excise had been hiked without affecting the RSP thus passing the benefit to OMCs.

“Dealers should not make profits due to increase in excise duty neither should they be burdened with loss due to reduction,” the association said.

The association also called for the central government to issue a one country one price mechanism for petrol and diesel in the country. Currently, the price of petrol and diesel varies not just between state to state but also across cities within the same state.

The association said that not buying fuel from OMCs was its way of showing dissent at the current scenario.

How Does This Affect Petrol Pump Operations?

For the most part, petrol pump operations should continue as normal tomorrow. The Association said, "our issues are with the oil marketing companies and not with the public. That's why the services will remain open."

The dealer body went on to say that some 70,000 pumps across 24 states in India would participate in this no purchase movement tomorrow though all pumps kept at least 2 days' worth of fuel stocks thus not affecting daily running though dry outs could be a possibility in some locations. However, the association did say that there would be some discontinuity in operation in Rajasthan with pumps set to be closed between 7pm and 11pm.