Economy

What does daily revision of petrol, diesel prices a.k.a dynamic fuel pricing mean?

Daily revisions will make retail prices more reflective of market conditions.

Daily revisions will make retail prices more reflective of market conditions.

What is dynamic fuel pricing?

State-run fuel retailers — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — currently revise rates on the 1st and 16th of every month, based on average international price in the preceding fortnight and the currency exchange rate. In dynamic fuel pricing, retail selling prices of petrol and diesel will be revised daily.

From when does it come into effect?

From 6 a.m. IST on June 16, 2017 the scheme will be implemented across the country. A pilot scheme is in place in five cities — Chandigarh, Jamshedpur, Puducherry, Udaipur and Visakhapatnam — since May 1, 2017.

Why the switch over now?

The move, according to the oil marketing companies (OMCs), will ensure that the benefit of even the smallest change in international oil prices can be passed down the line to the dealers and the consumers. Besides the move is said to remove big leaps in rates that need to be effected at the end of the fortnight. Consumers will be more aligned to market dynamics, state-run OMCs say. And of course, India will be following the practice of the most advanced markets.

Were there any opposition to the move?

Yes. Dealers were unhappy about switching over to the new prices every midnight. They had given a bandh call over the issue seeking change in timing as under the new regime they would have to deploy manpower everyday to change rates at midnight. The government has agreed to their demand and fixed the switchover time at 6 a.m. Besides, the Federation of All India Petroleum Traders, an umbrella body of fuel vendors, is concerned about inventory losses in case of drop in global prices and the move’s impact on dealers’ margins.

What are the hurdles?

Out of India’s 56,000 petrol pumps, less than 50% are automated to enable any centrally updated price change to take effect. By its own admission, market leader IOC has only 10,000 of its 26,000 pumps automated. While HP and BP have around 13,000 outlets each, only 2,000 and 8,400 are automated respectively. And the rest, IOC assures, will get timely information on the effective prices for the day. Fuel vendor bodies, such as the Delhi Petrol Dealers Association beg to differ. They say the automation system at most of the pumps are not supporting the automatic price change in the dispensing machine. Also, petrol dealers are not ready to manually update the price on a daily basis as manual intervention can lead to errors and delays in operation of the petrol pump, they add.


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Printable version | Aug 15, 2022 4:31:33 am | https://www.thehindu.com/business/Economy/the-hindu-explains-daily-revision-of-petrol-diesel-prices-aka-dynamic-fuel-pricing/article19061261.ece