Hoarding on price hike expectation leads to surge in petrol, diesel sales

India's auto fuel sales surged past pre-pandemic levels in the first half of March as consumers and dealers topped tanks in anticipation of a likely price hike post assembly elections.

Dealers, as well as the public, topped up their tanks as they anticipated prices, that have been put on hold in the run-up to the elections in states like Uttar Pradesh, will rise by a big margin to make up for as much as 60 per cent surge in the cost of raw material.

Petrol sales by state-owned fuel retailers, which control roughly 90 percent of the market, at 1.23 million tonnes during March 1-15 were nearly 18 percent higher than the same period last year and 24.4 per cent higher than the period in 2019, preliminary industry data showed.

Diesel, the most-used fuel in the country, saw sales jumping 23.7 percent year-on-year to 3.53 million tonnes. This was 17.3 percent higher than sales in March 1-15, 2019.

While petrol sales were 24.3 percent higher than the sales during March 1-15, 2020, diesel sales were up 33.5 per cent over the same reference period.
Month-on-month, petrol sales were up 18.8 per cent and diesel sales surged 32.8 percent.

Diesel sales during March 1 to 15 is the most in the first half of any month in the last two years and more than the total volume of diesel sold in April 2020 when the country was under a complete lockdown.

Industry sources said while there was a panic buying by individual vehicle owners, petrol pumps dealers topped up not just their storage tanks but also any mobile browser or tanker truck they had. The dealers hoped to make a quick buck by buying fuel at a lower rate and selling at revised higher prices.

Oil Minister Hardeep Singh Puri had on Monday stated that fuel sales had jumped 20 percent on comments exhorting people to tank up in preparation for an imminent hike in petrol and diesel prices.

Petrol and diesel prices hit the freeze button just as electioneering for five states including Uttar Pradesh picked up in early November 2021. The record 132-day freeze was despite the cost of raw material jumping from USD 81 per barrel to USD 130 per barrel.

It was anticipated that once the elections are over, state-owned fuel retailers will start adjusting the prices, which was as much as Rs 12 a litre below cost. But the rates haven't changed even after the outcome of the state polls, possibly not to give the opposition a handle amid the second half of the budget session that started on Monday.

"On 5th March, a political leader made a statement, saying, fill up your tanks quickly because petrol prices are going to go up as elections are over. And the consumption went up by 20 percent," Puri said in Rajya Sabha referring to a statement by Congress leader Rahul Gandhi. "It is a matter of shame that one statement led to hoarding of 20 percent."

On March 5, Gandhi had asked people to get tanks up as the "election offer" will end soon.

"Quickly get your petrol tanks full. The 'Election' offer of the Modi government is going to end soon," Gandhi said in a tweet in Hindi and used a picture of a petrol pump saying "Hike" and "Coming back soon to fuel stations near you".

The Congress has been accusing the BJP government of stalling the hike in fuel prices during elections and raising the prices soon after the polls are over.

The assembly elections in five states, including Uttar Pradesh, started on February 10, and ended on March 7. The counting of votes took place on March 10.

Puri said international oil prices had gone up from USD 19.56 per barrel in 2020 to USD 130 per barrel earlier this month and are now down to USD 100 per barrel.

"Oil marketing companies will take their decisions (on fuel prices). They will proceed once they can no longer bear it. If they don't have the margin or cushion, they will take the appropriate step," he had said.

Jet fuel (ATF) sales more than doubled to 232,900 tonnes in March 1-15, 2022 but were 31.1 per cent less than pre-Covid levels of 2019 and 27.5 percent less than sales in the same period in 2020.

India went in for a complete lockdown, stopping flights, halting rail and road movements and shutting businesses, in the last week of March 2020 to contain the spread of coronavirus. March 1-15, 2020 period was near normal as Covid restrictions were just kicking in.

The aviation sector is yet to resume normal operations.

LPG sales were up 17 per cent to 1.3 million tonnes in March 1-15, the data showed.