Petrol Pumps Across 24 States Demand Revised Commission, Refuse to Buy From OMCs

Around 70,000 petrol pumps across the country refused to buy fuel from Oil Marketing Companies (OMCs) on Tuesday.

Image used for representational purposes only.

(Photo: The Quint)

As many as 70,000 petrol pumps spread across 24 states in India said on Tuesday, 31 May, that they would not purchase fuel from Oil Marketing Companies (OMCs) to protest against no revision in their commissions despite a hike in the prices of petrol and diesel.

The protests have been organised by a group of state petrol dealers' associations.

The president of Delhi Petrol Dealers Association, Anurag Jain, while addressing a press conference, said that the move, however, was not likely to impact retail supplies to customers as pumps usually had fuel stocks for two days, and would continue selling on Tuesday.

Commission Rates Not Revised Since 2017

The states where pumps initiated protests include Tamil Nadu, Karnataka, Kerala, Telangana, Andhra Pradesh, Delhi, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Himachal Pradesh, Bihar, Assam, Meghalaya, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Tripura, and Sikkim.

Along with them, the North Bengal Dealers Association and some dealers in Madhya Pradesh and Uttar Pradesh also said that they would join the protests.

In Delhi, around 400 pumps said that they would not buy fuel, whereas in Maharashtra, as many as 6,500 pumps said that they would join the protests.

The dealers' associations say that even though there was an agreement with OMCs for dealer margins to be revised every six months, it had not been done since 2017.

"The prices of fuel have almost doubled since 2017, hence the working capital in business has doubled leading to additional loans and bank interests thereupon," a statement by the associations said.

Rising Costs

It also added that dealers were facing rising expenditures.

"Evaporation losses have increased proportionately. Also, the overhead expenses like bank charges, electricity bills, salaries etc have increased manifold during the last five years. Our constant demand to revise dealer commission has been overlooked by the OMCs. By doing so OMCs are making its own network financially unviable," the statement said.

Petrol pumps currently receive a commission of around Rs 2.90 per litre for petrol and Rs 1.85 per litre for diesel.

The associations said that even though commissions were hiked by around Re 1 per litre in 2017, the OMCs retained 40 paise of the total amount in the name of license fee.

'Reimburse Losses for Sudden Reduction in Excise Duties'

The dealers also sought reimbursements for losses incurred due to the reduction in the excise duty on fuel.

While associations welcomed the relief given to citizens through the reduction of fuel prices, they said that the sudden cuts led to a huge financial loss for dealers

"Central government in the past six months have announced two major cuts in excise duty (on 4 November 2021 and 21 May 2022), and the entire burden of Rs 13 per litre on petrol and Rs 16 per litre on diesel was passed on to the petrol pump dealers causing huge irrecoverable losses," the statement added.

As per the associations, the cut in excise duties led to a loss of around Rs 2,100 crore as they had already procured fuel at a higher duty, and had to sell at a lower price due to the price cuts.

Meanwhile, a report by the State Bank of India (SBI) said that states had gained Rs 49,229 crore from Value Added Tax (VAT) on fuel when prices were being hiked. The report said that states like Maharashtra, Gujarat, and Rajasthan could cut the price of diesel by at least Rs 2 per litre and petrol prices by Rs 3 per litre without it affecting their VAT revenue.

On 22 May, the central government slashed central excise duties on petrol by Rs 8 per litre and on diesel by Rs 6 per litre.