Petrol and diesel sales might have risen 12 per cent in November because of demonetisation as people thronged petrol pumps run by government-run oil companies where demonetised notes were accepted, but private retailers say their business was hit as they were denied a level-playing field.
Private fuel retailers Essar Oil, Reliance Industries and Shell were not allowed to accept the demonetised currency notes.
“Besides, we are not sure how the rebate on use of cards or cashless transactions will pan out for us,” said the senior executive with a private fuel retailer.
Long queues were seen outside petrol pumps of state-owned oil marketing companies (OMCs) on the night of November 8 when Prime Minister Narendra Modi announced withdrawal of high-value notes. Queues could be seen on November 9, too, but the rush eased subsequently. December 15 is the last day for accepting old Rs 500 notes at OMC fuel stations.
“On November 8, the government once again showed that there was no level-playing field for private fuel retailers,” a senior Essar Oil executive said recently at an industry event. “After decontrol of diesel, we find that re-establishing ourselves in the market has been difficult. While we were not selling due to high petroleum prices, the OMCs had expanded further. Indian Oil, for instance, opened up Kisan Seva Kendras over the past few years in rural areas.”
One of the reasons for not allowing private fuel stations to accept the banned currency notes could be the fear that black money might be laundered through this route. However, industry insiders say many such incidences were detected even at OMC outlets. A senior executive of Bharat Petroleum Corporation, however, countered the allegation. “We have kept a close watch on such transactions. While depositing cash in banks, retail pump owners had to produce proper invoices,” he said.
The three OMCs — Hindustan Petroleum Corporation Ltd, BPCL and Indian Oil Corporation – control 93 per cent of India’s fuel stations. Petrol and diesel together account 53 per cent of India’s petroleum product consumption.
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According to a Motilal Oswal report released on December 8, there could be a jump in the third quarter FY17 volumes for OMCs. “We believe the situation will normalise in 4QFY17 (offtake could be lower in the fourth quarter due to inventory stocking in the third quarter), leading to a marginal impact on numbers. We expect fuel demand to decline in the month of December, as the benefit to continued usage of old currency notes is phased away and also due slower goods movement, given the liquidity crunch,” it said.
Although both Essar and Reliance Industries rue the fact that their customers have shifted to OMCs, Shell in a statement issued just after the demonetisation drive announced that it would not accept banned currency notes at its outlets since the government has not allowed it. Shell had faced problems at some outlets where customers were insisting on tendering old notes.
Petrol consumption rose higher at 14 per cent during November over the last year, compared to 10 per cent increase in diesel sales. Like last year, petrol sales at 2.02 million tonnes in November 2016 were, however, less than October sales.
In case of diesel, the consumption has increased in November 2016 to 6.7 million tonnes compared to October 2016 though it had dropped last year.