Oil companies to revise petrol and diesel prices everyday

Beginning from May 1, Oil PSUs have decided to change petrol and diesel prices every day in synchronisation with international rates similar to what is practiced in advanced markets. As per the plan, pump rates will be decided based on daily movement in international oil prices and rupee-US dollar fluctuations.
Initially, the oil PSUs like Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL), which together own 95% of the petrol pumps in the country, will launch a pilot for daily fuel price revision in 5 cities viz. Puducherry, Vizag (Andhra Pradesh), Udaipur (Rajasthan), Jamshedpur (Jharkhand) and Chandigarh. After studying the implications of the pilot, the plan will be extended to other parts of the country.
Unlike earlier, automation at filling stations allows oil companies to centrally change prices. Availability of digital technologies and social networks have made much easier for the oil companies to convey the change in fuel price across the 53,000 filling stations in the country.

Present practice of price determination

Presently, Oil companies have the freedom to revise rates. They revise the fuel price on 1^st and 16^th of every month based on the average international rate of the fuel in the preceding fortnight and currency exchange rate.
While petrol prices were freed from the clutches of the government in June 2010, the diesel prices got deregulated in October 2014.

Significance

Though technically, oil PSUs has the freedom to revise the fuel prices, they are often guided by political considerations. Usually, a price hike is withheld by the oil companies during election season. To compensate for the losses incurred by the oil companies during election season, the government often allows the oil companies to maintain prices higher even when the international rates suggest otherwise. With daily changes in prices, the political pressures associated with revising fuel rates will ease.
Daily changes would change fuel price by just a few paise per litre every day. This means prices would not rise or drop sharply bringing relief to the customers.

Month: Current Affairs - April, 2017