Daily revision of petrol and diesel prices across the country starting June 16

Image Source : PTI Dynamic pricing running in 5 cities will be rolled out pan-India from June 16

Oil marketing companies (OMCs) are set to dump the current mechanism of fixing petrol and diesel prices on a fortnightly basis and instead move to a new mechanism across the nation from the second fortnight of this month. All state-owned oil companies have decided June 16 as the pan-India rollout date for the new mechanism, also known as dynamic pricing.

As per the new mechanism which is already running on a pilot basis in five cities -- Udaipur, Jamshedpur, Chandigargh, Vizag and Puducherry -- since May 1, state-owned oil retailers Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) will revise petrol and diesel prices on a daily basis.

“Daily price revisions of petrol and diesel will make the retail prices more reflective of the current market conditions, minimising the volatility in the RSP of petrol and diesel,” an official statement in this regard read.

The move, it said, will lead to increased transparency in the system and also enable smoother flow of products from refinery/depots to retail outlets. Many developed countries already revise the prices of petrol and diesel on a daily basis.

“Public Sector OMCs are taking steps to establish an appropriate mechanism for conveying the prices to consumers every day, including daily publishing of the prices in newspaper on a daily basis, prominent displays of prices at the retail outlets, sending of price-related data/SMS from the centralized locations, mobile apps etc.,” it added.

The move would also free private players - Essar Oil, Reliance Industries, and Shell, which currently follow the price set by state-owned companies, to also shift to a dynamic model.

Dealers, however, are worried of the impact of this move on their inventory management and margins since many of the petrol pumps are not automated.

"This will be a cause of concern as dealers will not be able to plan on how to manage their inventories. Moreover, not all the outlets in the country are automated. This may also affect our margins," A D Sathyanarayan, president, the Consortium of India Petroleum Dealers (CIPD), was quoted by the Business Standard.

Private oil companies too are expected to follow suit. In the five cities that the pilot project is currently operating, private players have adopted the same methodology.

According to figures from March this year, out of India's 56,190 fuel retail outlets, IOC, BPCL and HPCL's combined network accounts for 52,604. The private players in the sector are Shell, Reliance and Essar Oil.