Fuel sales decline as Covid-19 2nd wave hits demand

Fuel retailing, a weathervane of economic health, has been hit mainly by two factors—curbs in several states, and high prices of auto fuels, they said.
Petrol Price

Petrol pumps have seen a sharp decline in sales due to the second wave of Covid-19 and rising fuel prices. While sales in urban pumps declined 50-60%, business in rural pumps dropped by 20-30%, according to least 12 dealers from Maharashtra, Haryana, Uttar Pradesh, Punjab, Rajasthan, Karnataka, Goa, Delhi and National Capital Region (NCR).

Fuel retailing, a weathervane of economic health, has been hit mainly by two factors—curbs in several states, and high prices of auto fuels, they said.

“The double whammy of Covid pandemic and rising fuel prices have hit our sales volume, and thus, margins. Currently, sales are down between 30% and 60% depending on location (rural and urban areas),” said Ajay Bansal, president, All India Petroleum Dealers Association.

He said an outlet’s operating costs are fixed and a small percent of that is the dealer margin, which is calculated on sales volume. “As sales have plunged, we are unable to recover our fixed costs, such as electricity and wages (to pump attendants),” he said. Dealer commission on petrol in Delhi is ₹3.75 per litre (inclusive of all operational costs of pump owners), 4% of its retail price of ₹90.99 per litre. Dealer commission on diesel is ₹2.58 a litre, about 3% of its pump price of ₹81.42 a litre.

“The way second wave is spreading, a national lockdown cannot be ruled out which will worsen the situation. Besides, skyrocketing petrol and diesel rates are also responsible for a drop in sales. More than 90% customers purchase fuel for rounded value, such as ₹100, ₹200, ₹500 or ₹1,000. Irrespective of price hike, the amount remains the same, impacting our sales volume and hitting the margin,” said Meerut-based pump owner Hemant Sirohi.

After the assembly elections in four states and one Union territory got over this week, state-run oil firms resumed petrol and diesel price hike after a 66-day gap going back to February 27. Petrol was costlier by 59 paise per litre and diesel by 69 paise a litre on Thursday as oil retailers raised rates three days in a row.

“The first wave and all-India lockdown had hit sales hard. Sales recovery started from November last year and sales were almost recovered in March this year. But, the second wave came with lockdowns in many states. Sales have dropped again as much as 80% [in major cities under lockdown] and 20% in rural India,” said Pune-based Ali Daruwala, who is the spokeperson of the All India Petroleum Dealers Association.

Nischal Singhania, a Delhi-based dealer and former president of the Delhi Petrol Dealers Association (DPDA) said, “About 60% decline in petrol sales and 70% in diesel and CNG (compressed natural gas) is seen since the lockdown was announced on April 17. Although the previous lockdown was more drastic when sales dropped to 10-15%. We are heading towards a similar situation in Delhi.”

Rural Punjab is also experiencing 20-30% decline in sales, said Monty Sehgal, spokesperson, Petrol Pump Dealers Association of Punjab. “We are also hit by another factor. Due to VAT (value-added tax), fuel is ₹3-5 per litre cheaper in bordering states, hence our sales in bordering districts have dropped by about 50%,” he said.

A dealer, who owns a pump in rural Karnataka’s Yadgir district, said: “Sales have gone down as movement of goods such as construction materials is negligible.” Rural pumps in Karnataka are experiencing about 25% decline in sales volume, he said requesting anonymity.

Citing a 10% drop in sales in the Uttar Pradesh’s Hapur mandi area, Ashwani Attrish, founder and chief mentor, Empowering Petroleum Dealers Foundation, said, “Urban areas are more affected due to the second wave compared to rural areas because agricultural activities are supporting the rural economy.”

A North Goa-based dealer, who used to sell 33-35 kilo litre (KL) petrol and 16-17 KL diesel every day, has seen a 60-70% decline in sales after the second wave hit Goa and neighbouring Maharashtra and Karnataka, drying up the flow of tourists. “Initially, after the second wave, more ‘workationers’ came to Goa that kept sales volume up, but things have changed now with strict restrictions,” the person said requesting anonymity.

“Rajasthan has allowed pumps to sell fuel only for five hours in morning between 7am and noon. As a result, sales have gone down 20-60% depending on its location. Urban pumps are more affected than the rural outlets,” said Jaipur-based Rajendra Singh Bhati, who is also the chairman, VAT steering committee of the Rajasthan Petroleum Dealers Association.

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