Branded fuels may soon disappear from pumps

Written by Prashant Mukherjee | New Delhi | Updated: Dec 2 2012, 09:23am hrs
Faced with a continuing decline in retail sales of premium petrol (Power, Speed, Xtra Premium) and premium diesel (Hi-Speed, TurboJet, Xtra-Mile) due to high price differential, a bulk of the 45,000 petrol and diesel stations across the country may soon discontinue them in favour of regular versions of the two petroleum products.

Ashok Badhwar, president of Federation of All India Petroleum Traders, told FE, The sales have dropped from around 10,000 litres from a pump in a single day to only 500 litres. We have requested oil companies to reduce the rates of premium fuel or stop supplying it completely, as two nozzles at every pump dispensing the premium fuels become virtually useless. The federation has also urged oil marketing companies to drastically reduce the number of pumps stocking premium fuels, if a total phaseout is not possible.

In September, the government announced withdrawal of subsidy support for branded fuels (although branded fuels are nothing but regular auto fuels blended with special additives), which, in effect, increased branded fuel prices considerably. Currently the differential is upwards of R8 per litre for branded petrol and upwards of R18 per litre for branded diesel. The government had then cut excise duty on non-branded petrol by R5.50 to R9.28 per litre. But it did not cut the R15.96 a litre excise duty on branded petrol.

Said Srikumar, executive director of Indian Oil Corporation (IOC), which operates almost 40% fuel stations in the country, that the final push in the decline of sales of branded fuel was the withdrawal of subsidy support recently, which has dramatically brought down the volumes. Wherever possible and wherever loyal customers exist, we are endeavouring to supply branded fuels, both petrol and diesel. But given the current high price differential, takers for branded auto fuels are diminishing fast, he added.

As per official data furnished by the petroleum ministry, the sale of branded diesel dropped by 81% between FY10 and FY12, while that of branded petrol declined 55% in the same period. As a result, the oil marketing companies (OMCs) have virtually stopped producing premium petrol and diesel.

In terms of quantity, the decline stood at 63% for branded diesel and 36% for branded petrol in 2011-12 over the previous year.

As per industry estimates, the country has approximately 45,000 petrol stations. If there is negligible demand for branded fuel, it may put pressure on the OMCs, said experts.

Branded auto fuels were introduced in 2002 when the Indian market was about to explode with new world-class automobiles to ensure better mileage, smoother ride, quick and better pick up, engine cleanliness, and above all, an eco-friendly tag since it reduced emissions.

The going was good till 2007, when sales and network expansion was maximum. The difference between regular and branded petrol was about R1.50 and for diesel ranged between 40 paise to 75 paise. In the 2009 Budget, however, new special duties were introduced on branded fuels. The difference in branded petrol rose to R2.50 per litre, of which R1.75 was special duty. In the case of branded diesel, the difference rose to R4.95 per litre, of which special duty was as high as Rs 4.20.