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Petrol/Diesel Prices Will Change Daily Now; 3 Ways It Will Affect Us All

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4 Major Effects Of Dynamic Fuel Pricing-001

It is official now. Govt. has confirmed that fuel pricing has been made dynamic across India now, as petrol and diesel prices would be changed every day.

In April this year, Petroleum Ministry had initiated this dynamic fuel pricing in 5 Indian cities: Puducherry and Vizag in Southern India, Jamshedpur in the East and Chandigarh in the North and Udaipur in West. After successful completion of the test run in these cities, the Ministry has decided to implement the same pan-India, effective June 16th.

On Wednesday, representatives from Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and HPCL had a meeting with Dharmendra Pradhan, who is the Minister of Petroleum and Natural Gas, and decided to implement dynamic pricing for all Indian cities now.

These three oil marketing companies hold 95% share in the 58,000 petrol pumps in the country, and their approval means that dynamic pricing is now the rule.

As per initial reports, oil marketing companies have committed to a reliable mechanism to inform everyone about the current daily pricing of petrol and diesel. Newspaper advertisements would be carried over, besides SMSes and other forms of communication would be used.

Oil Marketing Companies Confirm This Change, But Petroleum Dealers Not Happy

Govt. backed oil marketing companies have confirmed this change, and have issued official statements regarding the same.

HPCL issues a statement, confirming the news: “Public Sector Oil Marketing Companies (OMCs), namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. and Bharat Petroleum Corporation Ltd. had implemented daily revision of Retail Selling Prices (RSP) of Petrol and Diesel on pilot basis in Udaipur, Jamshedpur, Puducherry, Chandigarh and Vishakhapatnam with effect from 1st May 2017. After its successful implementation, Public Sector OMCs have now decided to start daily revision in RSP of Petrol and Diesel in the entire country with effect from 16th June 2017”

As per HPCL, such dynamic price change daily will:

  • Retail prices would be more reflective of the current market conditions
  • Volatility in the RSP of Petrol and Diesel would minimise
  • Transparency would increase in the system.
  • Ensure smoother flow of products from refinery/depots to Retail Outlets

Indian Oil issued a statement: “Public sector oil marketing companies are steps to establish an appropriate mechanism for conveying the prices to consumers every day, including daily publishing of the prices in newspaper, prominent displays of prices at the retail outlets, sending of price related data/SMS from the centralized locations, mobile apps etc”

However, petroleum dealers, who manage these petrol pumps, aren’t happy.

Ajay Bansal, president of All India Petroleum Dealers Association said, “We are not happy with implementation and logistics will be difficult. At midnight it takes a few hours to change the rate. During this time we have to keep our pumps closed,”

3 Ways This Will Affect Us All

a) Inflation Effect But No Effect on Consumers:

As the prices of petrol and diesel would change daily, the prices of FMCG products such as vegetables etc can fluctuate daily, depending on the fluctuations in prices of fuel. Analysts are stating that consumers won’t feel the pinch, as the price fluctuations would happen in paisas, and overall, the end-users and consumers won’t be affected much.

b) Oil Marketing Companies Will Profit:

Oil marketing companies can now expect some solid profits, and reduction in their debts, due to immediate pricing changes. As of now, the changes are fortnightly, and the oil marketing companies are not able to monetize the price changes. In fact, dynamic price change was a strategy proposed by oil marketing companies to reduce their debts. However, the daily book-keeping process would elongate, taking more time to maintain the books of accounts.

c) Less Political Influence:

During elections, it is common for political parties to force the oil marketing firms to reduce the prices, in order to influence voters. This happens despite regulation of fuel pricing in India, as only oil marketing companies are allowed to change the prices. With dynamic pricing, such political interference would reduce, making the process of price changes more dynamic, and smooth.

We will keep you updated as we receive more information on this development.

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