Rising fuel prices in Kerala are driving vehicle owners from Kannur and Kozhikode to travel to the adjoining Union Territory of Mahe, where petrol and diesel are significantly cheaper. This influx of motorists is turning the Palloor bypass corridor into a major commercial hub.

Following the construction of the Mahe bypass, the service road has witnessed a surge in petrol pumps and liquor outlets catering to travellers seeking cheaper fuel and alcohol. Seven petrol pumps are now operational along the one-kilometer stretch, with another expected to open shortly. More than a dozen license applications are pending, though some applicants face technical hurdles that is preventing them from starting operations.

Liquor boom

Four liquor outlets, both old and new, operate along the service road near the fuel stations. Efforts are under way to move more liquor shops from Mahe town to the bypass to attract highway travellers.

Palloor has become a popular stop for motorists due to lower petrol, diesel, and liquor prices. Two access points facilitate easy entry and exit from the service road, and the nearby Chokli-Thalassery road features five petrol pumps and multiple liquor outlets.

While petrol in Thalassery costs over ₹110 per litre and diesel over ₹99, in Mahe prices are about while ₹97 and ₹87, respectively — over ₹12 cheaper. This price gap attracts highway commuters and residents from Kannur and nearby villages. “We don’t mind travelling 35 km for fuel savings of more than ₹12,” says Abhishek from Kizhunnu, Kannur.

Former Mahe MLA Ramesh Parambath said Mahe earns substantial revenue through tourism, fuel and liquor sales. He said that the six petrol pumps along the old National Highway, once heavily used by motorists travelling between Kasaragod and Thrissur, previously contributed significantly to this revenue.

However, after the Mahe bypass opened, revenue declined sharply, resulting in a loss of nearly ₹98 crore within six months. No new petrol pumps were allowed in Mahe between 2014 and 2022, but the Puducherry government later permitted new stations near the bypass to offset the revenue loss. The new pumps reportedly sell 40,000 to 50,000 litres of petrol and diesel daily.

Industry sources said that Puducherry’s policy promoting fuel and liquor sales has spurred the growth of these establishments. Officials are said to grant licenses to applicants with suitable land and technical qualifications.

The commercial rush has significantly raised land prices in the area, with petrol pump and liquor outlet owners buying land at prices much higher than market rates. Many investors purchased land prior to the bypass project’s completion, anticipating commercial opportunities.

Revenue loss

The boom has raised concerns among fuel dealers in Kerala, with Kannur District Petroleum Dealers Association Secretary M. Anil claiming that the government is facing significant revenue losses as motorists increasingly buy fuel from Mahe.

He claimed the State government was losing nearly ₹30 per litre in taxes and cess and said the total annual revenue loss could exceed ₹500 crore. According to him, fuel sales in parts of Kannur districts have dropped by nearly 55% in most petrol bunks.

Mr. Anil said the situation worsened after Kerala government imposed an additional ₹2 fuel cess, following which many dealers reportedly witnessed a 20% drop in sales. He added of the total petrol pumps in Kannur district, nearly 70% were selling less than one lakh litres a month, making operations financially unsustainable.

“Petrol pumps require monthly sales of at least 1.75 lakh litres to operate profitably. Dealers are struggling due to falling sales, rising investments and evaporation losses, while commission rates remain unchanged,” he said.

The association has submitted representations to the government and GST authorities seeking intervention. Fuel dealers also pointed out the number of petrol pumps in Kerala had increased considerable after the COVID-19 period, intensifying competition amid declining sales. However, the plea submitted by the association is yet to be addressed.