Reliance Industries Ltd (RIL) has asked its fuel dealers to brace for a 50% cut in diesel supply since the company is losing Rs 10-12 per litre on sale of diesel, said industry executives aware of the development.
The company took the decision in a meeting on Wednesday night to halve the diesel supply from Thursday, the executives told ET on condition of anonymity.
“I was informed last evening by my area manager that RIL would be supplying only half of the diesel volumes I sold in December 2021. They are taking December sales, before the Omicron variant impacted business, as a benchmark,” said a Jio-BP dealer.
RIL did not respond to ET’s queries till press time.
RIL operates fuel retail outlets under the brand name Jio-BP, which is part of its joint venture with BP – Reliance BP Mobility Ltd (RBML). The retail JV was set up in 2020 after BP paid Rs 7,000 crore to RIL for its 49% stake in the venture. RBML plans to expand fuel retail outlets to more than 5,500, from around 1,400 at present, at an investment of RS 3,000 crore.
Another dealer said his diesel trucks were returned empty from the fuel dispensing station on Thursday. “We have been asked by our area manager not to supply diesel in bulk to any customer as our supplies are being curtailed. This is not the first time RIL is doing this. We were in a similar supply crunch in 2006, 2009, 2012 and 2014,” said the dealer, who owns multiple dealerships with Jio-BP.
Industry executives said RIL is expected to ramp up exports of diesel to the European nations which are facing a supply crunch in the wake of Russia’s invasion of Ukraine for better economic considerations.
“Exports have been RIL’s staple. Its major customers are Europe and the eastern USA, where the markets have expanded to create a large value for them. Even if domestic fuel prices are increased, it will be no match for the export margins,” said a senior oil marketing company official.
Oil marketing companies are incurring a loss of up to Rs 25 a litre on average on sale of both petrol and diesel.
Indian fuel retailers have not revised the pump prices since November 4, when crude oil was $83 per barrel. On Thursday morning, global benchmark Brent crude was trading at $99.15 a barrel, having plunged from a high of $139 on March 7 but up from $98 a day earlier, when a fresh outbreak of Covid-19 in China eased concerns over demand.
RIL’s twin refineries in Gujarat can process 1.36 million barrels of crude oil per day. Its refineries have always been export-oriented. Europe has become an attractive market for Asian refiners since Russia’s invasion of Ukraine.