Bulk diesel sales fall 30% as users go for retail buys

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Prashant Mukherjee: New Delhi, Feb 18 2013, 01:14 IST

Last week’s 45 paise per litre increase in diesel prices bore out the government’s plan announced a month ago to nullify subsidy on the fuel over a two-year period, but bulk consumers are making a beeline to buy diesel in retail, threatening to mar the prospect of subsidy being reduced at the desired pace. An official from Indian Oil Corporation told FE on condition of anonymity that bulk sales have declined a sharp 30% since the prices were deregulated last month with an eye to reducing subsidy by over R14,000 crore annually.

IOC accounts for over 85% of bulk diesel sales, which is a fifth of the total market for the fuel in the country. There is roughly a 20% differential between bulk and retail prices after a nearly R10 per litre hike in bulk diesel prices last month.

The tendency among bulk consumers, especially state transport organisations, most of them in a financial mess, to skirt the price hike by meeting part of their demand by buying in retail has put the Centre’s plan in jeopardy. What compounds the problem for oil marketing companies are the chances of a rise in crude oil prices negating the benefit of recent measures. Oil marketing companies have already said that under-recoveries on diesel have only slightly increased over the past month, which saw crude prices going up by $4/litre or 3.6%.

Legal experts say nothing prevents states from allowing these organisations to buy diesel from retail outlets unless the central government

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