Petroleum dealers are assertively advocating for a shift to a unified tax system like the Goods and Service Tax (GST) across India. This call gains momentum in the wake of a recent peaceful protest held in Delhi by a faction of dealers from specific Northern states. The essence of their demand is to establish a consistent tax structure that spans across state boundaries. This initiative aims to eliminate the need for consumers residing near state borders to cross into neighboring states solely to purchase fuel, thereby nullifying the impact of fluctuating Value Added Tax rates. This reform would not only benefit customers but also prove advantageous for dealers located near these borders.
Elucidating this standpoint, K. P. Murali, the President of the Tamil Nadu Petroleum Dealers Association, underscores the practicality of uniform taxes. Murali emphasizes that the existing divergent tax rates create price disparities, making it inconvenient for consumers. Furthermore, the disparities can potentially hinder dealers’ operations, particularly those in close proximity to state borders.
Another persistent demand from these dealers is the enhancement of their profit margins. The Apoorva Chandra Committee’s 2016 report stressed that dealers need to sell 170 kilo litres per month to merely break even. This threshold would enable them to earn a remuneration of ₹27,500 monthly, coupled with an additional 5 paise per litre on diesel and 7 paise per litre on petrol, which translates to approximately ₹6,377 each month.
However, the practicality of this margin is disputed. Dealers contend that the operating cost of 34 paise per litre allotted to them fails to cover essential expenses such as internet charges, local government taxes, point of sale machine expenditures, fire fighting equipment, and other incidentals. This shortfall in support is particularly evident for dealers who transact lower volumes, with some reporting sales below 110 kilo litres per month.
A dealer with limited volume sales illustrates the challenge he faces. Despite the Apoorva Chandra Committee’s periodic recommendations to increase margins, he laments that his profit margin remains stagnant. The proliferation of retail outlets, numbering around 86,000 across India, has intensified competition. The situation is exacerbated by the establishment of new outlets in close proximity to his own. In light of these difficulties, he remains skeptical about the prospects of his business flourishing.
Tamil Nadu alone houses approximately 6,500 retail outlets that distribute fuel supplied by state-run oil marketing companies. The plight of these dealers reflects broader industry dynamics, underscoring the urgency for reforms that would not only ensure dealers’ viability but also benefit consumers by simplifying the fuel purchase process.