India's leading private fuel retailers, Reliance Industries Limited (RIL) and Nayara Energy, have initiated restrictions on petrol and diesel sales at various outlets nationwide. This development comes as global crude oil prices have soared to approximately $107 per barrel, while domestic retail fuel prices have remained frozen since May, significantly impacting the profit margins of private operators.
Why Fuel Sales Are Being Restricted
The primary reason for these restrictions is the widening gap between the rising cost of crude oil and the stagnant retail prices. This disparity has led to substantial losses for private retailers. Measures are being implemented to manage surging demand, prevent bulk hoarding by consumers, and mitigate financial losses for the companies.
- Nayara Energy, backed by Russia’s Rosneft, has reportedly capped diesel purchases at 200 litres and petrol purchases at 30 litres per transaction at its stations.
- Reliance BP Mobility, a joint venture between RIL and BP, has also implemented diesel sales restrictions at some of its outlets. The company stated these actions are in response to current demand conditions, aiming to ensure equitable fuel availability, especially for industrial and non-transport users.
Global Factors and Domestic Impact
Global gasoline and diesel prices have seen sharp increases due to ongoing supply disruptions. Conflicts in West Asia and the Russia-Ukraine war have significantly affected international oil production and trade routes. This environment creates an incentive for Indian refiners to prioritize exporting fuel, where they can achieve higher prices, over selling it domestically at fixed, lower rates.
Analysts at ICRA estimated that as of September 9, retailers were incurring losses of around ₹5 per litre on petrol and a substantial ₹23 per litre on diesel. With crude prices continuing their upward trend since then, these losses are expected to have intensified.
Consequences for Consumers and State Retailers
The restrictions by private players are also intended to curb the practice of bulk consumers purchasing large quantities of fuel, sometimes filling drums, to resell at higher prices. However, this could inadvertently shift more demand towards state-owned fuel stations, which include Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. These public sector companies collectively account for about 90% of India’s retail fuel market.
State-owned refiners are not immune to the pricing pressures. According to Oil Minister Hardeep Singh Puri, these companies are facing daily losses of approximately ₹5.3 billion (₹530 crore) by selling fuel below cost. The impact is already being felt by commercial transport operators, with some truckers reporting increased frequency of refuelling stops due to reduced diesel availability at private pumps.