Government says industrial consumers are buying cheaper retail fuel intended for small users

New Delhi: Industrial consumers, including factories and fleet operators, seem to have found an arbitrage opportunity in the government’s consumer-friendly retail fuel prices, which are meant for households and small users.

The Union Ministry of Petroleum and Natural Gas on Wednesday expressed concern that industrial consumers are buying cheaper retail fuel from pumps run by state-run oil marketing companies (OMCs) instead of more expensive bulk fuels, undermining the government’s efforts to cushion small buyers such as households, two-wheeler commuters and farmers from the impact of increased global oil prices.

Read also | The government has set a deadline of June 15 to decide on a playbook to curb inflation

The government has asked industry associations to inform their members about the principle and consequences of the breach, the oil ministry said in a statement.

The ministry reiterated that open methods of coordination in the public sector have not fully passed on the impact of increased oil prices to consumers and are currently experiencing a cumulative under-recovery of approx. ₹550 crore per day from the sale of petrol, diesel and cooking gas below market prices.

A shift in demand

It has also seen a shift in demand from private fuel retailers, where prices are higher and adjust more quickly to market rates, to state-run OMC outlets.

“It has been observed that private oil marketing companies have seen a decline of around 38% in the offtake of high speed diesel (HSD) during this month, both from retail outlets and wholesalers due to the higher rates they have imposed. This volume is completely shifting to PSU oil marketing retail outlets. Along with this, volumes from PSU wholesalers have also seen a drop of around 29%, which is also a statement from the petrol migration ministry.

“Industrial consumers who divert their purchases from the industrial channel to the retail pump capture this cushion at the expense of the common man,” he said, adding that they also concentrate demand at the pump and lead to local shortages.

Read also | Six or 74 days? Decoding India’s Oil Reserves Debate in Charts

He said the cushion – current retail pump prices that do not reflect international price increases – is intended for retail consumers and is not extended to industrial orders, where prices follow international realities as a matter of permanent policy.

India’s state oil marketing companies – IOCL, HPCL and BPCL – hiked petrol and diesel prices four times between May 15 and 26 by a cumulative ₹7.5 per liter. In the latest case, the hikers raised the prices of gasoline and diesel by more ₹2 per liter.

In the national capital, petrol prices were hiked by ₹2.61 per liter ₹102.12, while diesel prices rose ₹2.71 to ₹95.20 per litre.

Further, Defense Minister Rajnath Singh, who heads the Informal Group of Ministers (IGoM) on West Asia, also said that the supply situation in the country is currently normal and added that citizens should avoid panic buying of petrol, diesel and LPG.

Situation reviewed

During its sixth meeting, the group of ministers on Wednesday took stock of the evolving situation in the conflict and assessed India’s preparedness and response measures, the defense ministry said in a statement.

The IGoM also reviewed the stock of fertilizers in view of the ongoing kharif sowing season.

The statement said fertilizer availability in India for the ongoing kharif season remains comfortable despite disruptions from conflict in West Asia, with stocks currently exceeding 51% of projected seasonal demand – well above the usual benchmark of around 33%.

Read also | Are rising global fertilizer prices tightening India’s political rope?

The Ministry of Agriculture and Farmers Welfare has set the 2026 Kharif fertilizer requirement at 39.05 million tonnes (mt). As of May 27, availability was 20.04 mt, which is significantly higher than the usual level of about 33% of demand.

According to government data, nearly 12.24 mt of fertilizer was added to total availability – through domestic production and imports – after the outbreak of the Gulf crisis, helping to insulate the agricultural sector from external supply shocks. Urea availability included 5.95 mt from domestic production and 1.36 mt through imports, while DAP stood at 826,000 tonnes domestically and 88,000 tonnes through imports. For NPK fertilizers, it was 1.93 mt and 565,000 tons.