Oil firms use premium fuels to beat price curbs

In a bid to reduce over Rs 450 crore of daily retail losses from subsidised fuel sales, the country's government-owned oil marketing companies have started selling only premium fuels "" high-performance petrol and diesel mixed with additives "" in many petrol pumps in the major fuel-consuming cities of Delhi and Mumbai.

Indian Oil Corporation (IOC), the country's largest petroleum product marketer, has already started selling only premium fuels in nearly 25 of the 50 fuel stations it has in Mumbai, and in almost 10 of 50 outlets in Delhi. Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are also planning to follow IOC's example.

Premium petrol and diesel, unlike normal petrol and diesel, are outside the purview of price control. Their prices are loosely pegged to normal petrol and diesel prices but the oil marketing companies suffer lower losses on such sales.

The price of premium petrol is Rs 3 more per litre than normal petrol while premium diesel is around Rs 2.50 more per litre than normal diesel.

"The fuel stations which have started selling only premium fuels have been selected after studying consumption patterns. Demand for premium fuels at these locations is very high," said a top IOC official.
 

FUELLING FREEDOM Petrol and diesel prices in Delhi (Rs/litre)
Brand	Petrol	Diesel
XTRA PREMIUM (IOC)	48.5	33.11
SPEED (BPCL)	49.5	33.21
POWER (HPCL)	48.7	33.21
Normal	45.5	31.76

Consumption of premium fuels rose almost 89 per cent in 2007-08 over 2006-07. Premium petrol and diesel contributed almost 35 per cent of the total petrol and diesel sold by IOC, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) in 2007-08, up from 15 per cent in 2006-07.

The three companies said premium fuels will make up nearly 45 per cent of the total volume of petrol and diesel sold this financial year.

IOC, BPCL and HPCL are losing around Rs 13 for every litre of diesel they sell and around Rs 11 for every litre of petrol.

Raising diesel prices by even 50 paise per litre would help cut retail losses by around Rs 54 lakh per day for IOC alone, the company official said.

"We, however, cannot make premium fuels very expensive as the differential with normal fuels would price the product out of the market," the IOC official said.

Most of the fuel stations selling only premium petrol and diesel are company-owned and -operated.

Petrol pump dealers are, however, not happy. "We will strike work the day the oil companies force us to sell only premium fuels," said Ajay Bansal, general secretary of the All India Petroleum Traders Association, which has 32,000 petrol pumps as members.