State-run oil marketing companies such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) will revise the prices of petrol and diesel daily from June 16 throughout the country. The move is aimed at countering the practice of undercutting by private retailers as well as to bring India at par with the US oil market. Private retailers such as RIL and Essar are also expected to switch to the new pricing mechanism.
At present, State-run oil marketing companies revise rates of petrol and diesel on the 1st and 16th of every month by taking into account the average international crude price in the preceding fortnight and the currency exchange rate.
Daily revision of prices will insulate the retailers from volatility of global crude prices.
Daily revision of prices will result in small hikes rather than a steep rise which often attracts customer ire.
It has the potential to initiate a price war and bring competition in a market which is 95% dominated by the public sector retailers. it will give the state run retailers an opportunity to match private companies who have been undercutting them in a free market.
It will free the state run retailers from government interventions while fixing prices to suit political considerations. Although, technically public retailers have a free hand in fixing the prices of petrol and diesel, in practice political considerations often guide the public retailers.
Government has decided to implement the model throughout the country following the success of the a month-long pilot run in Udaipur, Jamshedpur, Puducherry, Chandigarh and Vishakhapatnam from May 1. In fact, the government has been planning for making daily revisions since 2012, but then the state run companies were not willing to implement citing lack of connectivity and infrastructure. Petrol pricing was freed from government control in 2010 and the diesel pricing was deregulated in 2014.