Dealer commission:Current status
April 14, 2011 11 Comments
Please read the following news item to know about the current status of Dealer commission.
Panel push for fuel price hike
13 Apr 2011
PETROLEUM BAZAAR New Delhi, Petrol and diesel prices can go up marginally by 50 paise and 20 paise respectively, if the government accepts a committee report on raising dealers’ commission. However, a more sharp increase will occur if the government pays heed to state-owned oil retailers’ plea to up prices. The surge in global crude oil prices has created a yawning gap between costs and prices that has led to the retailers losing Rs 17 per litre on petrol and Rs 4 on every litre of diesel. Any government decision on allowing the oil companies to raise fuel prices is expected only after the assembly elections to five states are completed in May, sources said. The oil ministry committee looking into dealer commission — the panel is headed by joint secretary (marketing) — has proposed an increase in commission of Rs 393 per kilo litre (kl) for petrol to Rs 1,611 from Rs 1,218 and Rs 170 per kl for diesel to Rs 927 from Rs 757. The committee was set up in September following an agitation by the dealers. Threatening an indefinite strike, the dealers had demanded an immediate upward revision as well as a formula that will lead to an automatic revision in their commissions with any change in petrol and diesel prices. Subsequently, the commission was raised by Rs 93 per kl for petrol and Rs 84 per kl for diesel. On the committee’s recommendation, Federation of All India Petroleum Traders president Ajay Bansal said that “this is a marginal hike. We have been demanding doubling of the commission in view of inflation and increase in other costs. We would soon meet the government to press for our demand”. The federation says it represents all the 38,700 petrol pump owners in the country. The committee, which also comprises director (marketing) of IOC, BPCL and HPCL, rejected the dealers’ demand of 5 per cent commission on the total value of petrol and diesel sold. Accepting it would mean that the “dealer commission varies on account of changes in the taxation structure by the Centre or the state governments. This is not an acceptable way of computing dealer commission as taxes should not play a role in arriving at dealer commissions”. The committee report said 90 per cent of the commission in petrol and 89 per cent in diesel went towards the reimbursement of various costs incurred in the running of retail outlets, including manpower, electricity, product loss compensation and working capital expenses. As the oil sector moves towards de-regulated pricing of petrol and diesel, the committee said there was a need to move away from the norm of uniform commission practised in the country. However, it said the dealers might not yet be ready for market level pricing principles as it would lead to substantial variation — as much as 40 per cent between the lowest and the highest commission — across states. Bansal said “the government has to fix the dealers’ commission uniformly across the country as leaving the commission to oil firms would result in corruption. An element of whims and fancies of the oil firms could also come into play.” Retailers bleed As the Indian basket of crude oil touched a 33-month high of $120.36 per barrel, the three state-owned oil firms — IOC, HPCL and BPCL — are pressing the government to hike petrol and diesel prices. The companies are losing Rs 17 on every litre of diesel and Rs 4 on petrol, which were deregulated in June last year. The loss of kerosene is Rs 28 per litre, while for domestic LPG cylinder it is Rs 315. The three oil firms “at current international crude oil prices lose Rs 174,126 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in 2011-12 fiscal,” officials said. The basket of crude India buys averaged $83.57 per barrel in 2008-09, and calculations for 2011-12 fiscal have been done at around $110 a barrel. In the 2010-11 fiscal, the three firms lost Rs 78,061 crore, but so far the government has provided only Rs 20,911 crore in compensation. In 2008-09, the government had issued oil bonds worth Rs 71,292 crore to the three firms to make up for more than two-thirds of the revenue loss. Upstream oil firms such as ONGC provided another Rs 32,000 crore. Courtesy: The Telegraph