Motorists from Kerala are flocking to Mahé for cheaper fuel, raising revenue concerns

A fuel tank that has come up along the service road of the recently inaugurated Mahe bypass at Palloor. | Photo credit: CP Sajit

Rising fuel prices in Kerala are forcing vehicle owners from Kannur and Kozhikode to travel to the adjoining Union Territory of Mahe, where petrol and diesel are significantly cheaper. This influx of motorists is turning the Palloor bypass corridor into a major commercial hub.

Following the construction of the Mahe Bypass, the service road has seen an increase in gas stations and liquor stores for travelers looking for cheaper fuel and alcohol. Seven petrol pumps are now in operation on the one kilometer stretch, with another expected to open soon. More than a dozen license applications are pending, although some applicants face technical hurdles that prevent them from starting operations.

The liquor boom

Four liquor dispensers, both old and new, operate along the service road at the gas stations. Efforts are underway to move more liquor stores from Mahe town to the bypass to attract travelers to the highway.

Palloor has become a popular stop for motorists due to lower prices of petrol, diesel and liquor. Two access points facilitate easy entry and exit from the service road and there are five petrol pumps and several liquor outlets on the nearby Chokli-Thalassery road.

While petrol in Thalassery costs over ₹110 per liter and diesel over ₹99, in Mahe prices are around ₹97 and ₹87 respectively – more than ₹12 cheaper. This price difference attracts highway commuters and residents from Kannur and surrounding villages. “We don’t mind traveling 35 km to save more than ₹12 on fuel,” says Abhishek from Kizhunnu, Kannur.

Former Mahe MLA Ramesh Parambath said Mahe earns substantial revenue through tourism, fuel and liquor sales. He said six petrol pumps along the old national highway, once heavily used by motorists traveling between Kasaragod and Thrissur, used to contribute significantly to this revenue.

However, after the opening of the Mahe Bypass, sales plummeted, leading to a loss of nearly ₹98 million in six months. No new petrol pumps were allowed in Mahe between 2014 and 2022, but the Puducherry government later allowed new stations near the bypass to offset the loss of revenue. The new pumps are said to sell 40,000 to 50,000 liters of petrol and diesel per day.

Industry sources said Puducherry’s policy of promoting the sale of fuel and liquor has spurred the growth of these establishments. Officials are said to grant licenses to applicants with appropriate land and technical qualifications.

The commercial rush greatly increased land prices in the area, with gas station and liquor store owners buying land at prices far above market rates. Many investors purchased land before the bypass project was completed, expecting commercial opportunities.

Loss of income

The boom has raised concerns among fuel dealers in Kerala, with Kannur District Petroleum Dealers Association secretary M. Anil claiming that the government is facing significant revenue loss as motorists are increasingly buying fuel from Mahe.

He claimed that the state government was losing nearly ₹30 per liter in taxes and cess and said the total annual revenue loss could exceed ₹500 crore. According to him, the sale of fuel in parts of Kannur districts has fallen by almost 55% in most fuel tanks.

Mr. Anil said the situation worsened after the Kerala government imposed an additional ₹2 on fuel, after which many vendors reportedly saw a 20% drop in sales. He added that of the total number of petrol stations in Kannur district, nearly 70% were selling less than one million liters per month, making the operation financially unsustainable.

“Petrol pumps require monthly sales of at least 1.75,000 liters to operate profitably. Dealers are facing declining sales, rising investment and losses due to evaporation while commission rates remain unchanged,” he said.

The association submitted an intervention statement to the government and the GST authorities. Fuel dealers also pointed out that the number of petrol pumps in Kerala has increased considerably post the COVID-19 period, which has increased competition amid falling sales. However, the cause of action presented by the association is yet to be dealt with.

Published – 21 May 2026 21:10 IST