The sale of branded fuel by oil marketing companies is falling, following the growing price differentials between branded and non-branded fuel because of high excise duty.
The sale of branded petrol and diesel, considered to be more efficient, has dipped by 27 and 50 per cent, respectively, in 2010-11 over the previous year (see chart), despite OMCs selling the products at a thin margin of less than a rupee.
Compared to 2007-08, when sales of branded fuel had peaked, sale of branded petrol has slipped 53 per cent, while diesel is down by 84 per cent.
Overall sales of petrol and diesel have grown by 37 and 26 per cent, respectively, in the same period. In 2010-11, petrol sale stood at 14.19 million tonnes (mt), while diesel sale was 59.99 mt.
At present, the difference between petrol and Xtrapremium (Indian Oil's branded petrol) in Delhi is Rs 2.50 a litre.
Xtrapremium sells at Rs 66.20, while non-branded petrol sells at Rs 63.70.
Similarly, diesel sells at Rs 41.29, while branded diesel of Indian Oil (Xtramile) is sold for Rs 46.21 a difference of Rs 4.92.
An IndianOil executive said out of the difference amount of Rs 2.50 on every litre of branded and regular petrol, Rs 1.18 goes to the central government as duties, while Rs 0.42 goes to state
In effect, the premium that comes to the company is just Rs 0.90.
Similarly, out of the Rs 4.92 difference between branded and regular diesel, Rs 3.86 goes to the central government, while Rs 0.55 goes to states.
The excise duties have been levied in he past couple of years, prior to which the difference in both branded petrol and branded diesel used to be in the range of around a rupee.
After a number of outlets across the country stopped selling branded fuel, the OMCs have taken up the matter with the ministry.
"We have written to the petroleum ministry last month, requesting the government to re-look the existing duty structure, since this will lead to the death of the branded fuel market," the official said.
An executive at Hindustan Petroleum said branded fuel was launched by the industry in 2002-03, when the government was planning to do away with the administered pricing mechanism and there was a threat of foreign competition and better products.
"Branded fuel was launched by OMCs after a lot of research, so that they could provide value for money to consumers. Branded fuel is custom-designed to deliver higher mileage, more power, better pick-up, faster acceleration, enhanced engine cleanliness and lower emissions. However, instead of encouraging its sales, the government has contributed to its decline."
