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No gains for pvt retailers from bulk diesel market pricing

State-run refiners saw some of their bulk customers shifting to using furnace oil against diesel

Kalpana Pathak Mumbai
The initial euphoria surrounding the freeing of bulk diesel pricing has not paid off for the private and state-run fuel retailers.

Two months on since the decontrol, the private fuel retailers—Essar Oil, Reliance Industries, Mangalore Refineries and Petroleum Limited and Shell—which were optimistic about part-taking in the bulk diesel sales pie of state-run players have together hardly sold 1,000 kilo litres of diesel.

The state run refiners, on the other hand, saw some of their bulk customers shifting to using furnace oil against diesel. "The bulk diesel sales segment has hardly seen any movement by private companies. Difference between bulk and retail is quite high. Besides, users are also looking at alternative energy sources," said a senior executive from a private refiner.
 

Of the total diesel consumption of 70 million tonnes per annum, currently around 18% forms sales of diesel in bulk against 20% in January. For the month of February, bulk diesel sales for Indian Oil Corporation and Bharat Petroleum Corporation Ltd have dropped to around 44% whereas, it dropped 47% for Hindustan Petroleum Corporation.

In retail sales, BPCL has seen an 8% growth while IOC and HPCL have seen a 7 and 5.5% growth, respectively.

"Many bulk customers are bringing down their diesel inventory holdings in view of the higher costs. A few infrastructure companies have also moved back to Furnace Oil (FO) as FO is now decidedly cheaper than Diesel. There was a time a year ago when Diesel prices were lower than Furnace Oil and  many bulk consumers found it worthwhile to switch to Diesel from FO then," said N Srikumar, Executive Director Communications and Branding, IndianOil Corporation.

Bulks users in cement, coal, mining, steel and sugar sector besides state transport understandings have registered a fall in demand for diesel.

Bulk customers have two categories—defence, railways and state transport undertakings which form 60% of bulk consumers—and industries like power plants, cement plants and chemical plants etc that formed the rest 40% users prior to market pricing for bulk sales.

"While PSUs have lost their market share in bulk sales, it has not gone to the private players. The private players can sell only bulk diesel to the industry at market prices. Which is roughly around Rs 10 more from the retail outlets prices. So the bulk consumers go to retail outlets to pick up their diesel. So the volume has shifted from direct sales to retail.

"We were never very bullish on deregulation but positive that at least there is a roadmap from the government. We are hopeful we will see volumes pick up going forward," said a senior official from a private fuel retailing compnay.

Government-owned companies—IOC, HPCL and BPCL—dominate the fuel retail business, with more than 90% share. Private fuel retailers form less than 10% of India's fuel retail business.

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First Published: Mar 20 2013 | 7:17 PM IST

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