With oil marketing companies (OMCs) facing dismal sales of their branded diesel and petrol products, the Petroleum Ministry in a bid to salvage their position in the retail market and to bail out the state-owned entities from suffering losses, has requested the Finance Ministry to subsidise these products.
Official sources told The Pioneer that the proposal has been recently sent to the Finance Ministry, seeking to subsidise these branded products on the justification that these are quite fuel efficient and therefore selling them at lower prices would further propel the Government’s drive to conserve energy. These products, which are sold at petrol pumps, are normally priced quite exorbitantly than the unbranded petrol and diesel used normally by all vehicles.
Incidentally the proposal has come at a time when the Petroleum Ministry on Tuesday launched a mega fuel conservation drive through which it plans to save $5 billion in oil imports, and for this it has suggested measures like staggered office timings for Government employees to decongest traffic, while it has also asked staffers to take public transport to workplace once a week to save fuel. Battling a record current account deficit (CAD) that is a result of mounting oil import bill, Petroleum Minister M Veerappa Moily is hoping these measures together with a Rs 52 crore nationwide six week mega campaign to propagate conservation of oil and gas will help taper demand.
India spent $144.29 billion last fiscal on importing its oil needs, which is the single biggest item impacting the CAD. Meanwhile owing to low demand mainly due to their exorbitant prices (despite their fuel efficiency), branded fuel products of the Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCl) and Hindustan Petroleum Corporation (HPCl) have over the last few years, witnessed a significant fall in sales.
In fact, according to industry sources, in the last five to six years there has been a fall of almost 10 per cent their sales, and the trigger for this was when in the 2009 Budget, new duty slabs were introduced on these kind of fuel products, that widened the already existing gap between the branded and unbranded petrol and diesel.
Also heavy vehicles like trucks and commercial SUVs gradually desisted from buying these products owing to the increase in their prices, thus seriously denting a major chunk of their customer base. Petroleum Ministry sources said that though these branded fuels are quite fuel efficient, their customer base is quite dismal, in fact it ranges to a few thousand in some cities, owing mainly due to their high price.
Therefore, the suggestion sent by the Petroleum Ministry to the Finance Ministry is based on the fact that if these are subsidised, not only the sales of these products would go up, but also the overall efficiency of vehicles would improve, something which is in line with its fuel saving campaign, official sources said. The response from the Finance Ministry is expected soon, sources further added, as the Petroleum Ministry is keen to expedite the sale of these products.
If approved, the OMCs which are already battling high subsidy burden, may be relieved of the additional headache of facing losses in the sales of branded fuel products.