A stress is beginning to surface at India’s fuel pumps, as state-run oil marketing companies (OMCs) increasingly insist on advance payments for fuel supplies to retail stations, limiting credit in most cases to barely a day.
Petrol pump dealers said that OMCs have yet to extend longer credit despite the Centre’s assurance of a wider window, pointing to a gap between policy intent and ground-level execution at a critical juncture for the energy supply chain. Tightening liquidity across the retail network has raised concerns over supply continuity amid the West Asia conflict, they said.
On March 26, the petroleum and natural gas ministry said that efforts were underway to expand the credit window for dealers from one day to up to three days to ease working capital pressures and prevent disruptions. However, dealers say advance payments continue to dominate fuel procurement.
What did Marri Amarender Reddy say?
“In most cases, advance payment continues to be the norm on the ground. While the government’s indication of a three-day credit facility is a positive step, it has not yet translated into actual implementation, and there has been no formal communication from OMCs regarding the resumption of credit for retailers,” said Marri Amarender Reddy, general secretary of the United Petroleum Dealers Association (UPDA).
In a representation to the government, dealer bodies warned that the rollback of earlier credit systems is beginning to affect supply dynamics. They said recent changes have “adversely affected the supply chain and are likely to cause product shortages at retail outlets.”
The communication highlighted the importance of earlier systems in sustaining daily operations. “This facility enabled dealers to deposit cash collected during the day into their bank accounts and then remit the payment to the OMCs,” it said, referring to the day-end credit system that had long underpinned fuel distribution.
The withdrawal of such mechanisms has altered the operating cycle. “Dealers are now compelled to make advance payments before supplies are released, which has severely disrupted the supply chain and pushed the entire dealer network to the brink of low stocks,” the letter noted.
Until recently, OMCs offered a layered credit framework — including day-end settlement, short-term revolving credit of three to five days and bank-backed dealer financing — that helped dealers maintain inventory buffers and extend limited credit to customers.
“The recent shift by all three state-run OMCs to seek advance payments has created significant pressure on dealers’ working capital. Until recently, we operated with short-term credit lines stretching a few days, which helped maintain smooth operations and stock levels,” said Uday Lodh, president of the Consortium of Indian Petroleum Dealers (CIPD), which represents about 30,000 outlets.
“The sudden withdrawal of these facilities is disrupting cash flows on the ground, especially for smaller dealers, and could impact fuel availability if not addressed urgently,” he added.
What do dealers say?
Dealers say even the limited flexibility that remains is proving inadequate. “Dealers are currently being extended only end-of-day credit by companies like HPCL and BPCL, requiring full payment settlement within the same day. On bank holidays, dealers have to send the payment on the next bank working day,” said K.P. Murali, president of the Tamil Nadu Petroleum Dealers Association.
The stress is particularly acute in rural and semi-urban markets. “The advance payment requirement is particularly challenging for smaller pumps… where issues such as server downtime and limited banking infrastructure make timely transactions difficult,” Reddy said.
He added that operational disruptions are already visible. “During recent holidays like Good Friday, when banks were closed, this system disrupted operations and, in some cases, even led to stock-outs at fuel stations.”
Dealer groups also flagged that outlets which had built their business models around extending limited credit to customers are now facing “serious difficulties in recovering their dues, leading to an acute cash crunch.”
The timing of the squeeze is critical. The ongoing West Asia conflict has tightened global supply conditions and increased volatility in oil markets, amplifying pressure across the downstream ecosystem.
Queries sent to the petroleum ministry and OMCs, including IOC, BPCL and HPCL, remained unanswered till press time.
The government, however, has maintained that supply conditions remain stable. “All refineries are operating at high capacity, with adequate crude inventories in place. The country is also maintaining sufficient stocks of petrol and diesel. All retail outlets are operating normally across the country,” the ministry of petroleum and natural gas said.
It also noted that instances of panic buying have been observed in certain areas but reiterated that adequate stocks are available nationwide.
At the same time, financial pressure on OMCs remains elevated. According to the government, companies are incurring under-recoveries of ₹24.40 per litre on petrol and about ₹104.99 per litre on diesel, reflecting the gap between global prices and retail rates. The Centre has reduced excise duty by ₹10 on both fuels to ease pressure and avoid price hikes.