Fuel rates will vary daily in Chandigarh, 4 cities from May 1

dynamic pricing at a few of our retail outlets for some months now, and the response has been encouraging. This has allowed us to go ahead and introduce it formally,” an executive director from an oil marketing company said on condition of anonymity as he is not allowed to talk to reporters.

Currently, state-run fuel retailers—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)— revise fuel rates on the 1st and 15th of every month based on average international price of the fuel in the preceding fortnight and the currency exchange rate.

“Due to the fortnightly revision of fuel prices, petroleum dealers were applying brakes on uplifting of fuel. If the prices go up, on the 1st or 15th of every month there would be a rush to uplift products, else, the upliftment would be impacted. This would result in losses for OMCs and we wanted that this price predictability should go away. So dynamic pricing will be a good bet,” said a senior official from an oil marketing company on the condition of anonymity.

Shares of IOCL fell 0.07% to ₹408.90 on BSE, BPCL rose 1% to ₹717.60, HPCL rose 1% to ₹542.45 while India’s benchmark Sensex fell 0.49% to 29,643.48 points.

Although state-run fuel retailers have the capability to revise prices on a daily basis, what needs to be monitored is how consumers react to price volatility, industry experts say.

“If there is heightened volatility in global markets due to geopolitical developments, it could get reflected in domestic retail prices too. Therefore, companies are doing the right thing in testing the model in pilot projects to see how its impact and consumer response. In the medium- to long-term, daily price revision may be a good idea as is practised elsewhere,” said R.S. Butola, a former chairman of Indian Oil Corp.

Indian Oil Corp. chairman B. Ashok and Hindustan Petroleum Corp. chairman and managing director M.K. Surana didn’t immediately respond to phone calls. Besides, global fuel prices and currency exchange rate, central and state taxes account for a major part of the fuel price. It accounts for half of retail petrol price and 46% of retail diesel price.

The central government collected ₹64,509 crore from petrol as excise duty in 2016-17 up to end-February, 20% more than what was collected in the whole of FY2016. Excise receipts from diesel jumped 36% in the same period to ₹1.37 trillion.