Digital discounts: Oil companies losing ₹1,500 crore every quarter

MUMBAI: State-run fuel retailers— Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) — are losing nearly ₹1,500 crore a quarter in providing discounts to customers using digital modes to buy fuel, two people aware of the matter said.

The digital discounts scheme that was brought in post demonetisation, was to be implemented till March 31, but was extended indefinitely.

“The OMCs (oil marketing companies) put together are foregoing nearly ₹1,500 crore every quarter in providing digital discounts. We, however, are not terming it a loss. While these discounts are helping increase digital transactions, they are also bringing in footfalls,” said the first of the two people, a senior official from the marketing division of a fuel retailer. He spoke on condition of anonymity as he is not allowed to talk to reporters.

Emails sent to IOCL, BPCL and HPCL on Friday were not answered.

After the withdrawal of highvalue currency on November 8 last year led to a cash shortage, the government on December 8 announced a discount of 0.75% for purchase of auto fuel using credit and debit cards and e-wallets at fuel stations run by the OMCs. The discount came into effect on December 13, 2016. The discount is credited to a customer’s account as a cashback within three working days.

In addition, the OMCs also bear charges on merchant discount rate (MDR), a fee charged on card usage at swipe machines. The fee is 1% on credit card transactions and 0.25-1% on debit card transactions. MDR is levied at the time of purchase, and paid to the bank. The government waived MDR at fuel stations till December 31 to encourage cashless transactions.

“We did not anticipate the discount period would be extended this long,” said the second official mentioned earlier.

“So far, there has been no directive from the government on ceasing the discounts; so, we have to continue with it.”

Satish Mishra and Deepak Kolhe of HDFC Securities in a 3 June note on HPCL said, “We sense a possibility of a year-onyear decline in profits in FY18, led by hit of ₹500 crore per annum owing to a rise in digital payments for auto fuels and doubt on inventory impact.”