Hiccups in supply trigger fuel shortage across some states

The government’s tacit directive to state-run oil companies to keep petrol and diesel rates frozen has disrupted the deregulated fuel trade, leading private refiners to sharply divert loss-making domestic sales to lucrative export markets and prompting public sector retailers to adopt restrictive measures to reduce losses, which in turn has led to a scarcity in various parts of the country, according to people aware of the developments.

To be sure, there is no fundamental shortage of fuel but an artificial one created by companies seeking to maximise profit (the private ones) or reduce losses (the state-owned oil retailers).

Ground reports by HT correspondents from various locations in Uttar Pradesh, Madhya Pradesh, West Bengal, Haryana, Punjab and Rajasthan pointed to a supply shortage in smaller towns and rural areas, particularly at pumps operated by Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). Several pumps run by private operators such as Reliance and Nayara Energy faced acute fuel shortages, and some of them even went dry.

Indian Oil Corporation (IOC), which is the biggest fuel retailer in the country, appeared to still have stocks, and farmers in these regions were commuting long distances to get fuel (mainly diesel) from their pumps for the sowing season. IOC, BPCL and

HPCL enjoy a monopoly in fuel trade, with about 90% market share. These public sector oil marketing companies (OMCs) effectively control pricing.

As of June 16, state-run OMCs were incurring a ₹19.7 per litre revenue loss on petrol and ₹31.9 a litre on diesel, a second executive working in another private oil company said, requesting anonymity. “No private firm can bear this kind of loss. As far as public sector OMCs are concerned, they know that ultimately the government will bail them out,” he added.

HT’s ground reports from several locations across six states found that many bulk customers (mainly transporters) shifted to retail because petrol in bulk is about ₹11 per litre costlier and diesel in bulk is costlier by over ₹31 a litre (bulk buyers get charged more). Officials aware of the matter said that, in order to minimise revenue losses, some state-run firms were using innovative mechanisms to reduce sales.

They included reducing the supply timing of fuel from depot to pumps, and denying fuel on working credit to pump owners. HT first reported this trend on May 6.

In Haryana’s Rohtak, Jind and Bhiwani, some of the HPCL fuel stations were also rationing due to short supply. Sachin Suhag, owner of Suhag fuel station in Rohtak, said, “They are unable to get petrol from HPCL for the last one week and the supply of diesel has been cut.”

The government also said some private pumps were exacerbating the situation.