New Delhi: State-owned oil marketing companies will start changing petrol and diesel prices every day in five states according to international prices from May 1.
The five cities are Puducherry, Vizag, Udaipur, Jamshedpur and Chandigarh. Oil companies have around 200 fuel stations in these five cities. This will be a pilot project, which will be later extended to the whole country.
With daily changes, which are unlikely to be more than a few paise per litre, political pressures for not revising rates particularly when they are to be hiked will go.
The plan is to identify issues with daily change in prices in the five cities before a pan-India implementation. Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum own around 90 per cent petrol pumps in the country.
India deregulated petrol prices in June 2010 and diesel prices in October 2014. Since then, oil firms have been changing prices of these two products once in 15 days depending upon international prices and currency exchange rates.
However, 15 days of backlog in some instances had resulted in inventory losses for oil marketing companies when crude oil prices saw a sharp reduction in the past. The move will make oil-marketing companies’ margins more predictable. The move will also help India move to an international standard of fuel pricing.
This would free private players Essar Oil and Reliance Industries, which currently follow the price set by state-owned companies, to shift to a dynamic model.
Oil companies had cut petrol prices by Rs 3.77 per litre (excluding state levies) and diesel by Rs 2.91a litre (excluding state levies) on April 1 due to a decrease in global crude oil prices. However, crude oil prices have shot up after that due to tensions in West Asia. This could result in an increase in petrol and diesel prices in the country on April 15 when the next review of fuel prices is due.