All three private operators together held a 2.3% share of the domestic retail market for diesel in July, compared to 2.9% in June and 10.6% in July 2021, as per data obtained from oil companies. Their share in petrol slipped to 5% in July from 5.6% in June this year and 9.8% in July last year.
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This resulted in increased sales and unwanted market share gains for state refiners at a time when fuel prices were artificially static. In July, state-run refiners had a combined share of 95% in petrol and 97.7% in diesel. A year earlier, their share was 90.2% in petrol and 89.4% in diesel.
The big and sudden shift in demand from the pumps of private players to public companies caused great inconvenience to customers in some places during the summer while adding to the losses state companies were already incurring due to the retail price freeze. Indian OilNSE 2.24 %, Bharat Petroleum and Hindustan PetroleumNSE 3.88 %, the state-run retailers, have reported a combined loss of Rs 18,500 crore in the April-June quarter.
Private players blamed the price freeze for lower sales. “Our sales were impacted in the last few months as the retail selling price of petrol and diesel had not kept pace with international benchmarks. That said, oil price and product cracks have come down in recent times, thereby enabling us to regain market share, particularly in the case of petrol where margins are now positive,” Nayara Energy told ET.
Reliance, Shell, IOCNSE 2.24 %, BPCLNSE 3.59 % and HPCLNSE 3.88 % didn’t respond to requests for comment.
What accentuated the trouble for state refiners is the strong fuel demand in the country. The retail sales of petrol and diesel rose 6.9% and 17.6% in July over the year.
The unusual rise in diesel retail sales was also due to industrial customers switching to petrol pumps for cheaper fuel. In many cases, oil companies encouraged the switch for fear of losing industrial customers to rival retailers, industry executives said.
Diesel directly sold to industrial customers fell 54% in July from a year earlier. In June, the decline was 44%. In July of 2021, direct sales of diesel to bulk buyers comprised 13% of total diesel consumption in the country. In July this year, the share fell to 5.5%.
Oil companies directly sell to industrial customers at a price that’s lower than retail but in the past few months bulk supplies have been far more expensive than fuels available at pumps.
Private players’ sales to bulk buyers also fell nearly 60% over the year in July, with their market share declining to 10.7% from 11.9% in July 2021.
At the beginning of July, the government had imposed a windfall tax of Rs 6 per litre on the export of petrol and Rs 13 per litre on diesel. It also directed refiners to sell in the domestic market at least 30% of the diesel and 50% of petrol they export. On July 20, the tax on the export of petrol was scrapped and reduced to Rs 11 on diesel. Tax on diesel has fallen further to Rs 5 per litre this month.
Private refiners are responsible for 80-85% of fuel exports from the country. They also sell to state-run fuel retailers at international prices. Whatever they sell to state companies also counts as domestic sales for the private refiners.