DY­NAMIC FUEL PRIC­ING

India Today - - INSIDE - —M.G. Arun

Come May 1, and public sec­tor oil com­pa­nies will re­sort to dy­namic fuel pric­ing at their fuel re­tail out­lets, where prices of diesel and petrol will change daily in ac­cor­dance with changes in global crude oil prices. There are 58,000 petrol pumps in the coun­try, 95 per cent of which are owned by public sec­tor com­pa­nies such as In­dian Oil Cor­po­ra­tion, Bharat Pe­tro­leum Cor­po­ra­tion and Hin­dus­tan Pe­tro­leum Cor­po­ra­tion and the re­main­der by Re­liance In­dus­tries and Es­sar Oil. The daily dy­namic pric­ing, which will re­place the fix­ing of fuel prices ev­ery fort­night (on the 1st and 16th of ev­ery month), will be taken up on an ex­per­i­men­tal ba­sis in five cities—Jamshed­pur, Chandi­garh, Vizag, Puducherry and Udaipur.

Fuel pric­ing is a sen­si­tive is­sue, and no govern­ment would want to risk trans­mit­ting higher global prices to the re­tail mar­ket. Why then has the BJP govern­ment de­cided to ex­per­i­ment with dy­namic pric­ing? Well, the US Energy In­for­ma­tion Ad­min­is­tra­tion has fore­cast Brent crude prices to av­er­age $54 per bar­rel in 2017, and bar­ring geopo­lit­i­cal tensions, oil should hover be­tween $50 and $60 a bar­rel in the next year. So con­sumers are un­likely to feel the heat of high fuel prices any­time soon, even if trans­mit­ted on a daily ba­sis.

The move is also the next log­i­cal step af­ter the dereg­u­la­tion of petrol and diesel prices (in 2010 and 2014). How­ever, the suc­cess of the new model will hinge on how “clearly prices are com­mu­ni­cated to cus­tomers. Tools like SMSes will be key,” says Ravichan­dran, se­nior V-P at ratings firm Icra. Not too many are happy. “Daily price change will be a gam­ble, it will cre­ate chaos at pumps. We will be prone to losses too,” says Ashok Bhard­waj of the Fed­er­a­tion of All In­dia Pe­tro­leum Traders. Ex­pect some con­fu­sion in the ini­tial days.

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