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  1. Know why you have to pay more for buying petrol and diesel from August 1

Know why you have to pay more for buying petrol and diesel from August 1

Consumers will have to pay more for petrol and diesel starting August 1 as the oil marketing companies have decided to increase the dealer commission they pay fuel pump owners.

By: | New Delhi | Updated: August 2, 2017 4:34 PM
oil marketing companies, All India Petroleum Dealers Association, petrol, diesel, petroleum ministry, petrol price Ajay Bansal, president of All India Petroleum Dealers Association told FE that the new commission rates will be effective from August 1.

Consumers will have to pay more for petrol and diesel starting August 1 as the oil marketing companies have decided to increase the dealer commission they pay fuel pump owners. The dealer commission forms part of the price of the fuel that consumers pay and is currently Rs 2.55 per litre for petrol and Rs 1.65 per litre for diesel. The All India Petroleum Dealers Association has been asking for a Rs 1 per litre hike for petrol and Rs 0.72 litre for diesel. Ajay Bansal, president of All India Petroleum Dealers Association told FE that the new commission rates will be effective from August 1.

Though now petrol and diesel prices are revised on a daily basis in tandem with international crude prices, the hike may be slighter higher
now if crude price rises and decrease less if it goes down because of the increased dealer commission. Dealer associations have been threatening to go on strike since June 16 when daily change in retail prices began (earlier prices were adjusted on 1st and 16th of every month) as they claim the new system erodes their margins because they face inventory losses when crude prices and subsequently retail prices go down.

According to the petroleum ministry’s statement in Parliament on July 26, the price of petrol and diesel in Delhi was Rs 64.11 per litre and Rs 54.93 per litre, respectively, on July 16. Of this, Rs 2.55 a litre goes as dealer commission in the case of petrol and Rs 1.65 a litre for diesel. Dealers claim that the commission at present is too low to cover expenses and make a profit. “The national average sale per outlet is 170 kilolitres of fuel every month. Assuming this sale, a dealer makes only 14 paise per litre which converts to around Rs 25,000 of profit per month,” said Bansal. This is after paying for operational costs such as wages and electricity, and account for return on capital and evaporation of fuel. Bansal claims that as much as 1% of the fuel evaporates.

“We had requested to increase expenses earmarked under each of these components which translates to a little over Rs 1 per litre for petrol and around 72 paise for diesel,” said Bansal, adding that wage costs have gone up by around 42%, varying across states, for dealers in the past six to eight months. Ever since the daily revision in fuel prices was introduced, consumers have been the beneficiary. The price per litre of petrol was down 0.7% on July 31 compared with June 16 when daily change in price came into effect, and fell as much as 3.7% on July 2.

 

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