State-owned fuel retailers, namely Indian Oil Corp. (IOC), Hindustan Petroleum Corp. Ltd. (HPCL) and Bharat Petroleum Corp. Ltd. (BPCL), have planned to launch a pilot scheme under which the fuel prices will be revised on a daily basis. The rates will be decided in sync with the international rates, a practice of several advanced markets.
Reports suggest that initially the scheme will be launched in 5 Indian cities from 1 May 2017 (a defined final date was not declared but sources said that the pilot will be effective from 1 May) and will be gradually extended across India.
At present, the rates of the fuel are revised on the 1st and 16th of every month in accordance with the average international price in the preceding fortnight and the currency exchange rate.
The five cities where the pilot scheme will be launched are Visakhapatnam and Puducherry in Andhra Pradesh, Jamshedpur in Jharkhand, Udaipur in Rajasthan and Chandigarh.
IOC, HPCL and BPCL own over 95 per cent (nearly 58000) fuel outlets in the country.
IOC Chairman B Ashok told about the scheme to the PTI, “Ultimately, we will be driving towards market-linked rates on a daily basis at all pumps across the country”. He also said, ““It is technically possible to change rates daily, but we have to first do a pilot. Once the pilot is done and its implications are studied, we will extend it to other parts of the country”. The idea is to reflect daily movements in international oil prices and rupee-US dollar fluctuations on a daily basis instead of using the fortnightly average.
Effect of the change
The daily price change will help in doing away with the big leaps in rates that are visible in every fortnight. It will also help the consumers to be settled with the market dynamics.
The petrol price was freed from the control of the government in June 2010, while the prices of diesel were deregulated in October 2014. This freedom means that oil companies were allowed to revise the rates as per them instead of being guided by the political regulations.