At pump, cash-short oil cos will push branded (expensive) fuel

Suffering huge under-recoveries on auto and cooking fuels, state-run oil marketing companies today started curtailing supplies...

Suffering huge under-recoveries on auto and cooking fuels, state-run oil marketing companies (OMCs) today started curtailing supplies of subsidised diesel and petrol in metros and their adjoining areas to shift consumers to higher-priced branded alternatives. However, a decision by the three OMCs to suspend issuing new cooking gas connections has been opposed by the Petroleum Ministry with petroleum secretary M S Srinivasan instructing them to desist from taking such a step.

From today, the OMCs refused supply of normal diesel to retail outlets that sell 200 kilolitres or more per month — almost all petrol pumps in cities come under this — asking them to lift and market “branded alternates” that come at an extra Rs 1.30 per litre for diesel and Rs 3-4 for petrol, providing benefits such as “power booster” and “engine-cleansing” properties.

The move is aimed at reducing the losses that the three OMCs suffer on selling diesel and petrol at government-determined retail prices. The three are currently losing Rs 14 a litre on petrol and Rs 21 a litre on diesel, of which the government would reimburse 50 per cent while state-run upstream firms ONGC, GAIL India and Oil India would bear 33 per cent.

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Since pricing of branded fuels is outside the realm of the government, the OMCs hope to make good the losses on diesel by forcing the metro consumers to shift to branded fuels such as Xtramile (Indian Oil Corp), Turbojet (Hindustan Petroleum) or Hi Speed Diesel (Bharat Petroleum). This would be then spread throughout the country, with those dealers that sell 100 kilolitres or more being told to switch to selling branded diesel only. In the next stage, branded petrol Speed (BPCL), Power (HPCL) and Xtra Premium (IOC) would be pushed in the four metros.

Similarly, the three lose Rs 330 on every LPG cylinder that they sell to households. Of this, they are reimbursed Rs 22.58 from the budget with the remaining under-recovery shared in the same method as petrol and diesel.

With LPG prices remaining unchanged since November 5, 2004, the new strategy of the OMCs was to cut losses by restricting new connections while restricting cylinder refills to existing customers 24 days after the last delivery. When they informed the ministry that they had stopped issuing new connections from Thursday, they were told to lift the ban and instead concentrate on checking diversions and multiple connections, sources said.