Oil firms shift to daily revision of fuel prices

State-run oil companies Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) started selling petrol and diesel in sync with international rates on Friday, meaning fuel prices will change daily.

These government-run firms, which have around 90% share of the Indian fuel retail market, adopted the new dynamic pricing model after trying it out since May 1 in Udaipur, Jamshedpur, Puducherry, Chandigarh and Visakhapatnam. Reliance Industries Ltd and Essar Oil Ltd, which have a much smaller presence, compete with the state-run fuel retailers in some markets.

India now joins countries such as the US and Australia where diesel and petrol prices move in tandem with the price of crude oil. The National Democratic Alliance (NDA) government’s move comes at a time when the crude oil prices are subdued and below $50 per barrel.

The price of crude oil in the Indian energy basket was $46.48 per barrel on Wednesday. The Indian energy basket represents the average of Oman, Dubai and Brent crude oils.

This may be the first step in a complete overhaul of the Indian fuel retail market. Mint reported on June 1, 2015, that state-owned firms are considering a differential pricing option, wherein consumers pay marginally different rates for petrol and diesel in a city, depending on the location of the outlet and the time of day.

Petroleum minister Dharmendra Pradhan said in a tweet on Friday, “Proud to share that India is first country to switch to dynamic fuel pricing on such a scale in one go.”

This assumes significance given that India’s energy import bill of around $150 billion is expected to reach $300 billion by 2030. India imports around 80% of its crude oil and 18% of its natural gas requirements. India imported 202 million tonnes of oil in 2015-16.

India is very important in the global energy market. China and India accounted for half the 1% growth in the global energy demand in 2016, which was around half the average growth rate of the past decade, said the BP Statistical Review of World Energy released on Tuesday.