Diesel’s evading bulk consumers

The bulk consumers of diesel, who now have to pay Rs 10/litre additionally, are going to the retail market to take advantage of the price differential. It is reported from various parts of the country that supermalls, big restaurants, telecom tower operators etc are penetrating into the retail segment. The only bulk customers who purchases diesel at the higher price is the public sector companies, departments and corporations.

It seems that the government has not done enough home work for ensuring the bulk customers to keep at the nonsubsidised rate. There was no prerequisite attempt to clearly identify the bulk customers. Besides, there was no mechanism to ensure that they are purchasing from the OMCs (Oil Marketing Companies) at the stipulated price.

In the absence of fencing of retail market from the bulk consumers, the new diesel pricing may not be a success. This is because; most of the revenue from the increased price is expected to come from the bulk consumers. At present, around 18% of the diesel demand comes from bulk consumers. While retail diesel price increases by 50 paisa only, that on bulk consumers goes up by ten rupees. So, the revenue impact of the new price measure is skewed towards the bulk segment. If the policy fails on that front, it is unlikely that the new diesel price rise will bring any fiscal relief to the government.