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New fuel price every midnight from May 1

Business Standard:  May 01, 2017

New Delhi: Two-and-a-half years after the National Democratic Alliance government introduced complete diesel deregulation in October 2014, stage is set for a new petroleum pricing regime. 

Starting Monday, five places — Puducherry, Visakhapatnam, Udaipur, Jamshedpur and Chandigarh — as part of a pilot project will see petrol and diesel being sold under a daily price change regime. 

While it took India eight years and a lot of political bickering to completely get rid of an administered price regime for petrol in 2010, daily price change could become a reality much faster if the five pilots succeed. 

Technological innovations such as price push will help oil marketing companies (OMCs) change price at midnight at over 100 outlets starting Monday. An Indian Oil Corporation executive said prices would change at the back-end in 43 of its 109 outlets in these five cities. “For the remaining, dealers will have to do it themselves,” he said. Prices will be conveyed to dealers a day earlier at 8.30 pm. Adequate information on prices will be provided to consumers too via SMSes and press releases.

The base prices of petrol and diesel will continue to be the global benchmarks. Marketing margins, dealer commission, tax and other levies will be added to the base price. “We will continue to take 15 days’ average but it will change every day in these cities. The days will be calculated skipping the previous two days to make the pricing more precise. For instance, for a new price on April 29, global prices of previous two days will be skipped. An average of 15 days will be backdated from April 26,” the official added. 

Till now, diesel and petrol prices were changed on the 1st and 16th of every month depending on the preceding fortnight average.

Arjun Singh, president of Chandigarh Petroleum Dealers Association, said, “Oil companies have already installed hardware and software needed for daily updates at our outlets. It will be an automated technology connected to VSAT. If it fails, we will display the prices manually.” 

Daily revision will ensure that changes are not very high. The scepticism surrounding the pilots, however, continues. Chandigarh has 41 retail outlets and dealers here are worried that daily pricing could lower profitability, said Singh. 

When it was fortnightly pricing, dealers used to take maximum and minimum stocks depending on the prices, which might not happen now, he added.

Ajay Bansal, president, All India Petroleum Dealers Association, said, “Mohali and Panchkula are inter-linked to Chandigarh and pumps there will now lose market to nearby cities, if prices are high.” This move might lead to holding of fuel and should be launched pan-India to avoid confusion, he added.

Dealers said it might lead to confusion as the rest of India will become aware about the upcoming prices from the price flow in these five cities. 

State-owned IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation own over 95 per cent of nearly 58,000 petrol pumps in the country.

Fuelling change

  • Petrol and diesel prices were decided by the govt till March 2002
  • From April 1, 2002, a fortnightly system of pricing was adopted
  • Govt reverted to controlled pricing when global prices soared
  • Following Kirit Parikh panel report, petrol prices were decontrolled in June 2010
  • Phased increase in diesel price every month began in January 2013
  • Low global prices helped govt to allow full diesel decontrol in October 2014

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.