Fuel pumps on Kerala borders prepare for bloodbath post the Rs 2 cess as business slump by 75%

Kannur: The NH66 snaking through Mahe, the smallest district in the country, is chock-a-block, especially at night. The reasons are two: one, the highway from Panvel to Kanyakumari narrows to a two-lane road without shoulders; and two, almost all commercial trucks and passenger cars make a bee-line before the fuel stations abutting the highway. There are five fuel stations in the two-km stretch

The fuel price differences between Kerala and Mahe, a district of Union Territory Puducherry, are too wide for the drivers to ignore -- around Rs 12 for petrol and diesel.

Jomit, a truck driver from Perumbavoor in Ernakulam district, says he buys just enough fuel from Ernakulam to reach Mahe.

Trucks have a fuel capacity of 460 litres and 360 litres. "A full tank in Mahe saves us around Rs 4,000 to Rs 5,500. That's not a small amount," he says.

Jomit supplies plywood to Pune and brings back onions.

Mahesh Kamat, who runs a fuel station 6km from Mahe, but at Thalassery in Kerala, says his business dropped by 60% because of the sharp price disparity. "I used to sell 6,000 litres of diesel every day in 2021. Now, I barely manage to sell around 1,500 litres," he says. The Rs 2 cess on petrol and diesel will be a bloodbath for petroleum dealers in Kerala's border areas, he says.

In Mahe's 8.69 sq km area, there are 17 fuel stations, that is one in every 500 sq metre. (To put that in perspective, Kasaragod has one in 27 sq km.)

Every fuel station in Mahe is selling up to 50,000 litres of diesel every day, says Kamat. "Oil refineries supply fuel to them even on Sundays. The demand in Mahe is insatiable," says Kamat.

Passenger cars from Vadakara in Kozhikode district and Koothuparamba and Thalassery in Kannur districts prefer to buy petrol and diesel from fuel stations on the sub-roads of Mahe.

But what is hurting the dealers even more is that the cooperative hospitals in Kannur, Thalassery, and Vadakara buy fuel from Mahe. "Cooperative hospitals need around 600 litres of diesel every week to run their generators and they buy it from Mahe," he says. The irony is most of the cooperative hospitals are controlled by the CPM, which is publicly defending the higher fuel prices in Kerala and the additional cess, he says.

Petroleum dealers say the companies engaged in widening NH66 are also buying fuel from Mahe and Mangaluru in Karnataka. "We cannot blame the private construction companies when our own KSRTC is buying fuel from outside the state," says Tomy Thomas, state president of All India Petrol Pump Dealers Association.

The bureaucrats running the state-run transport corporation do not realise that the government is losing more in taxes than the money it is saving by allowing KSRTC to buy cheaper fuel from Karnataka, he says. Kerala levies a value-added tax of Rs 18.21 per litre of diesel (22.76%). But the diesel price difference between Kerala and Karnataka is Rs 12.

Tomy Thomas explains: If KSRTC buys 5,000 litres of diesel from Karnataka pumps, the corporation saves Rs 47,000 when compared with the high price in Kerala. "But the Kerala government will stand to lose Rs 91,000 as VAT," he says.

Six fuel stations shut shop in Kasaragod
In Kasaragod, which shares its border with Karnataka, six petrol pumps have closed down and many more are ailing, says the petroleum dealers association. Before Diwali of 2021, the 73 fuel stations in the district used to sell around 5 lakh litres of diesel every day.

"Now it has fallen to 3.15 lakh litres," says Moosa Cherkalam, state secretary of All India Petrol Pump Dealers Association.

If the sales slumped by around 37% across the district, the fuel stations along the border took the fatal hit. "Sales at the border pumps fell by 90% to 95%, eventually leading to their closure," he says.

Kerala Fuel, owned by Mahamood P A, sits on the border of Karnataka and Kerala at Talapady on NH66. On average, Kerala Fuel used to sell 12,000 litres (one load) of fuel (4,000 litres of petrol and 8,000 litres of diesel) every day. After November 2021, its sales slumped to 1,200 litres a day. Now Kerala Fuel, the first pump inside Kerala borders, is shut. The price disparity killed it.

Indian Oil runs a fuel station 50 metres from Kerala Fuel but inside Karnataka. It has put up a board highlighting the price difference and has a long queue before it.

K Lakshminarayana, Kasaragod district treasurer of the dealers' association, runs a fuel station near Kasaragod town, 30km from the border. He used to sell 10,000 litres of diesel before November 2021. "Now I sell only 2,000 litres, mostly to local cars and pickups," he says.

The commercial trucks plying from Mumbai to Kochi do not even slow down near his pump, he says. "Our main business is commercial trucks. Ten trucks will bring us the business of 200 cars," he says.

Dealers earn Rs 3.16 as a commission for every litre of petrol sold. "So our income comes down by 60% to 90% when our sales drop. We are not shutting down fearing the banks. We are running on a huge overdraft," he says.

Dealers in Kasaragod and Kannur say they were doing reasonably well till November 2021 when the Union government slashed the excise duty on petrol by Rs 5 and on diesel by Rs 10. This led the Puducherry government to reduce VAT on petrol and diesel by another Rs 7. Petrol prices in Mahe fell to Rs 92.52 from Rs 105.32 per litre, and diesel prices fell by Rs 18.92 per litre.

Karnataka was the first state to reduce VAT after the Union government slashed excise duty, bringing down the price of diesel by Rs 19.47.

They say the state government is levying tax on tax and then introducing a new cess.

In March 2015, a few months after chief minister Oommen Chandy announced the closure of bars in Kerala, finance minister K M Mani introduced a cess of Re 1 on petrol on diesel.

To be sure, Mani had targeted to raise around Rs 350 crore that year to build houses for the homeless. The incumbent K N Balagopal is targeting to raise Rs 750 crore as seed money for the social security fund with his cess of Rs 2.

"Oommen Chandy's cess has not been withdrawn yet. Now Pinarayi Vijayan is introducing another cess of Rs 2," he says.