Petrol pumps run on thin credit as oil marketing companies tighten purse strings

Dealers said credit was extended for up to five days under a revolving system till about the first week of March, but now OMCs are “insisting on advance payments for all supplies” or allowing only a day's credit for fuel purchases in some places.

United Petroleum Dealers Association, which represents dealers from 14 states, in a letter to the petroleum ministry said, “We earnestly request you to kindly intervene and direct the OMCs to immediately restore the day end credit limit and holiday credit facilities and strictly implement the government's directive of providing at least 3 days' credit to dealers.”

Mint earlier reported that amid high oil prices and a supply squeeze due to the war in West Asia, OMCs halted supplies on credit to fuel retailers.

On 26 March, the petroleum and natural gas ministry had said that efforts were underway to increase the supplies from one-day credit period to up to three days of supplies on credit.

“In most cases, it is still advance payment. For large retailers there may be instances of a day's credit, but not all are getting that,” said Marri Amarender Reddy, general secretary of the UPDA. "Especially in rural areas, for smaller pumps, this is a concern. The government's announcement of efforts for three-day credit is a welcome move and OMCs should officially inform the retailers on resumption of the credit policy."

Uday Lodh, president of the Consortium of Indian Petroleum Dealers (CIPD), which represents about 30,000 fuel outlets, said Indian Oil Corporation (IOC) is offering one-day credit selectively to “high-selling dealers”, while Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation (HPCL) are mostly continuing with advance payment requirements.

A petroleum ministry official, however, said on condition of anonymity that supply on credit has resumed.

A BPCL spokesperson, in response to an email query from Mint, said, "We would like to confirm that we have structured financial support mechanism to facilitate sufficient inventory at our retail outlets. This is aimed at ensuring consistent product availability for our esteemed customers. This policy remains same as it was before the war broke out in March,"

Queries emailed to the spokespeople of the ministry of petroleum and natural gas, IOC, and HPCL remained unanswered till press time.

A Delhi-based petrol dealer, on condition of anonymity, said that although the three-day credit policy has not been implemented by the state-run OMCs and supplies are, by and large, based on advance payments, IOC has allowed an end-of-the-day credit facility wherein payments need to be made at the end of the day's operations.

During recent holidays such as Mahavir Jayanti, when banks were shut, OMCs allowed one-time credit purchases, which would be for about 20,000 litres for most pumps, the dealer said.

The business typically operates through three credit mechanisms: end-of-day payment, revolving credit of three to five days, and electronic dealer financing, where a bank issues a letter of comfort to the OMC to supply fuel to an outlet for 15-30 days.

Monty Sehgal, spokesperson of the Petrol Pump Dealers Association, Punjab, said advance payments are being sought by the OMCs in most cases even as supplies have eased now.

In Tamil Nadu, dealers said all three OMCs are now offering end-of-day credit. "But its not given for three days," said K.P. Murali, president, Tamil Nadu Petroleum Dealers Association.

The government maintains that fuel availability remains adequate nationwide and all retail outlets are operating normally across the country. "Instances of panic buying due to rumours have been noticed in certain areas, resulting in unusually high sales and crowding at retail outlets. However, adequate stocks of petrol and diesel are available across all petrol pumps in the country," the ministry said on Thursday.

Oil marketers have kept prices of regular petrol and diesel unchanged, while raising those of premium petrol and diesel amid the rise in global oil prices.

According to the government, OMCs are incurring under-recoveries or losses of ₹24.40 per litre on petrol and about ₹104.99 per litre on diesel. The government has reduced excise duty on both fuels by ₹10 to lower the pressure on the OMCs and avoid any price hike in regular transport fuels.