Govt Says Industrial Consumers Buying Cheaper Retail Fuel Meant For Small Users

(MENAFN- Live Mint) New Delhi: Industrial consumers, including factories and fleet operators, appear to have found an arbitrage opportunity in the government's consumer-friendly retail fuel pricing, which is intended to benefit households and small users.

The Union ministry of petroleum and natural gas on Wednesday raised concerns that industrial consumers are buying cheaper retail fuel at pumps operated by state-run oil-marketing companies (OMCs), instead of costlier bulk fuel, undermining the government's efforts to cushion small buyers such as households, two-wheeler commuters and farmers from the impact of elevated global crude oil price.

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The government has asked the industry associations to make their members aware of both the principle and the consequence of violations, the petroleum ministry said in a statement.

The ministry reiterated that public sector OMCs have not fully passed on the impact of elevated crude prices to consumers and are currently incurring cumulative under-recoveries of about ₹550 crore per day from selling petrol, diesel and cooking gas below market rates.

Shift in demand

It also noted a shift in demand from private fuel retailers, where prices are higher and more quickly aligned with market rates, to the outlets of state-run OMCs.

"It has been observed that private oil marketing companies are experiencing a decline of approximately 38% in high-speed diesel (HSD) offtake during the current month, across both retail outlets and bulk customers due to higher rates fixed by them. This volume is shifting entirely to PSU oil marketing retail outlets. Coupled with this, PSU bulk customer volumes have also recorded a decline of approximately 29%, which is also migrating to retail outlets," the petroleum ministry said in a statement.

"Industrial consumers who divert their purchases from the industrial channel to the retail pump capture this cushion at the cost of the ordinary citizen," it said, adding that they also concentrate demand at the pump and lead to local shortages.

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It said that the cushion-the current prices at retail pumps which do not reflect the increase in international prices-is intended for the retail consumers and is not extended to industrial procurement, where pricing tracks international actuals as a matter of standing policy.

India's state-run oil-marketing companies-IOCL, HPCL, and BPCL-raised petrol and diesel prices four times during 15-26 May by a cumulative ₹7.5 per litre. In the last instance of price hike, they raised petrol and diesel prices by over ₹2 per litre.

In the national capital, petrol prices were raised by ₹2.61 per litre to ₹102.12, while diesel prices rose by ₹2.71 to ₹95.20 per litre.

Further, defence minister Rajnath Singh, who heads the informal group of ministers (IGoM) on West Asia, also said that the supply situation in the country is normal currently, while adding that the citizens should avoid panic purchases of petrol, diesel and LPG.

Situation reviewed

During its sixth meeting, the group of ministers on Wednesday reviewed the evolving situation in the conflict and assessed India's preparedness and response measures, said a statement from the defence ministry.

The IGoM also reviewed the fertilizer stock in view of the ongoing kharif sowing season.

The statement noted that India's fertilizer availability for the ongoing kharif season remains comfortable despite disruptions arising from the conflict in West Asia, with stocks currently exceeding 51% of projected seasonal demand-well above the usual benchmark of around 33%.

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The Department of Agriculture and Farmers' Welfare has pegged fertilizer requirement for Kharif 2026 at 39.05 million tonnes (mt). As of 27 May, availability stood at 20.04 mt, significantly higher than the usual level of about 33% of demand.

According to government data, nearly 12.24 mt of fertilizers-through domestic production and imports-have been added to overall availability after the Gulf crisis emerged, helping insulate the agriculture sector from external supply shocks. Urea availability included 5.95 mt from domestic production and 1.36 mt through imports, while DAP stood at 826,000 tonnes domestically and 88,000 tonnes through imports. For NPK fertilisers, the figures were 1.93 mt and 565,000 tonnes respectively.

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