GOVINDA K. writes: Last night, the Union government hiked petrol prices. Even before the official announcement was made, most of the petrol bunks started sporting “No Stock” boards. Minister R. Ashok “raided” many petrol bunks and warned those who had stopped supplying petrol.
This did not come as a surprise for me as I had seen all this happen ad nauseam for years. Some of my relatives own petrol bunks, and I had seen them discussing petrol price hikes, since the times of George Bush‘s Iraq war when too petrol prices saw a steep increase, at closehand.
This is how it all happens:
1. The news of price originates from petroleum ministry office. That flows down to the offices of each oil marketing company (Bharat Petroleum, Indian Oil Corporation, Hindustan Petroleum, etc) and finally comes to the ears of the service station dealers. Such news usually starts doing the rounds almost two weeks before the official increase.
2. The dealers are usually tipped off by their sources in the oil marketing company on the payment of a certain prefixed amount. This was the trend some years ago. Now, due to the internet and continuous speculation by media, dealers come to know about price hike from other sources too.
3. If a cabinet meeting is scheduled to be held on a particular date when news of a hike is in the air, then it is almost always a sure sign of a price hike effective midnight.
4. When there are strong reasons to believe that there’s going to be a price hike, the dealers pay a certain amount of money. On such payment, the dealer is supplied with stocks on demand. There is more demand for stocks in such situations. Those dealers who make a higher payment will be given stocks on preference.
5. There is yet another way of making more profit. If the dealer pays more money, the people in the supply plant will send an extra load of fuel in a tanker which will be parked at the service station. Note that a fuel tank at a service station can only accommodate a certain limit of fuel. When dealers want to make more profit, they fill their tanks full and get an extra fuel truck.
6. Just a day before the price hike, the service station boys will be advised to go slow on fuel supply. And in few hours, they start putting “No stock” board and totally stop the fuel supply.
How is it an extra profit?
For every litre of petrol or diesel, the oil marketing company fixes a certain amount as commission for the dealer. During price hike, the dealer buys the petrol at the older rate and stops supply. He sells the same fuel at a higher price when the new rates become effective.
The commission given to the dealer on every litre of petrol is about Rs 1.20.
After the latest hike, a dealer will get Rs. 1.20 (commission) + Rs. 3.50 (price hike) = Rs. 4.70 (total) per for every litre of petrol. That’s the profit margin.
Fuel is measured in terms of KL (kilo litres) or 1,000 litres. Usually in one load, an average dealer buys about 4 KL of petrol (4,000 litres) and 8 KL (8,000 litres) of diesel. One load is sufficient for a period of 2-3 days. If the service station is situated in a city like Bangalore, one load will be just sufficient for one day.
You have all the variables, just calculate the amount of profit made by a dealer taking one load of fuel.
On the other hand, when there is a decrease in price which is not often, the same sources in the oil marketing companies can be relied upon to inform the dealers not to place orders. Even for this, there will be an amount to be paid for the “informers”. Hence the dealers make sure that they do not suffer any loss.
In both the cases, it is the common man who suffers due to NO STOCK!!
Photograph: BJP workers stage a dharna in Dharwad on Saturday against the increase in prices of petroleum products. (Karnataka Photo News)