Energy Crisis: Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and Indian Oil Corporation Limited have suspended fuel on credit to limit the offtake of petrol and diesel by retail outlets in the country.
According to media reports, Indian Oil has halted its five-day revolving credit policy on Monday while BPCL and HPCL have started advance payments from last weeks.
Energy Crisis-Will This Cause An Oil Shortage In India?
BPCL, HPCL and Indian Oil serve the country’s nearly 100,000 retail fuel stations. Agriculture and industrial buyers who buy fuel on credit may also take a hit. After LPG shortage in the country, a shortage in the supplies of petrol and diesel in the country may aggravate the common man’s plight.
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Nischal Singhania, President of Delhi Petrol Dealers’ Association, remarked the primary of oil marketing companies may be retailers who have a default record. Singhania added that the move is focused at ensuring economic prudence in the prevailing Middle East crisis while also making sure a lower-than-usual offtake because of the requirement for upfront payment.
Potential Petrol And Diesel Supply Disruptions On Cards?
As the revolving credit facility gets put off, dealers may anticipate chaos, especially in regions where bulk credit sales to transport, agriculture and other industries form a large revenue share. Credit halts to petrol and diesel pumps could soon translate into reducing farming and transport activities. This, in turn, results in indirectly tightening of overall demand and station restocking.
What Is A Revolving Credit Facility?
A form of business finance, revolving credit facility is leveraged by small medium enterprises and others to navigate seasonal trading, uneven cash flow or time-sensitive opportunities.
The facility allows businesses to draw funds, repay the borrowed funds and draw again up to a specific limit, paying interest only on the used amount.
Revolving credit facility allows petrol and diesel pump owners to bridge short-term, working capital gaps along with funding supplier payments or operational costs. It also helps in covering time-sensitive or urgent expenses and managing seasonal fluctuations.
