Daily fuel price revision distorts neighbouring markets

Rajalakshmi S Updated - January 11, 2018 at 06:54 PM.

fuel

The move to implement daily fuel price revision has pushed neighbouring markets towards price distortion on its very first day.

An oil marketing company official told BusinessLine that prices were not aligned with the country in those cities where the pilot project is being implemented. This has distorted the regional market from May 1 itself, according to Jharkhand Petroleum Dealers Association President, Ashok Singh.

He said, “The near 50 paisa hike in diesel price was not implemented in Jamshedpur. This market has been distorted from the very first day.”

On May 1, petrol prices were hiked by one paise per litre and diesel by 44 paise a litre in the country and this was not implemented in those cities where the daily revision project is in force.

An oil marketing company executive told BusinessLine that the price varies in similar regions because of a different formula being used to decide the fuel price.

He said, “The moving average of product price for the last 15 days with a lag of two days is taken into consideration for deciding the price in cities where the pilot project is effective. In other cities, the average price of the last 15 working days is considered. Effectively, there comes out to be a difference in the pricing of fuel under both methodologies.”

Under the daily price revision regime, the prices of petrol were hiked by one paise per litre in Puducherry and Udaipur till May 3. Prices of diesel on the other hand were cut by 1 paise per litre in Visakhapatnam, Udaipur, Puducherry, Jamshedpur and Chandigarh. These are the 5 cities where the pilot project is running. Fuel prices remained unchanged in all other cities.

According to official release from Indian Oil, the prices of diesel in Jamshedpur stood at Rs 60.26/litre on May 1. In contrast, diesel prices in Jharkhand’s capital Ranchi were at Rs 60.87/litre. The prices of petrol in Jamshedpur stood at Rs 69.33/litre on May 1. In contrast, petrol price in Ranchi was Rs 69.97/litre.

The difference is also in Rajasthan and the prices of diesel in Udaipur stood at Rs 61.23/litre on May 1. In contrast, diesel prices in Jaipur were at Rs 61.58/litre. Prices of petrol in Udaipur stood at Rs 70.57/litre on May 1. In contrast, petrol prices in Jaipur were at Rs 71.12/litre.

In Visakhapatnam, petrol prices on May 1 were at Rs 72.68 a litre, and diesel stood at Rs 62.81 a litre. Comparably, in Andhra Pradesh’s capital Hyderabad, petrol price were at Rs 72.68, while the prices of diesel were at Rs 62.53 a litre.

Outlets in union territories such as Chandigarh and Puducherry anyway have a larger differing price due to nil State tax levies.

President of Punjab Petroleum Dealers Association, Sandeep Sehgal said, “There is already a difference of around Rs 5 a litre to Rs 6 a litre between the prices in Chandigarh and the rest of Punjab.” The same is the case with Puducherry.

The successful implementation of daily fuel price revision hinges on the increased penetration of automated fuel retail outlets.

An oil marketing company executive said. “Currently, 50-55 per cent of all retail outlets in the country are automated. The pilot project for dynamic fuel pricing is going to go on for three months. We expect the number of automated outlets to increase considerably to allow a nationwide roll out of this daily price revision.”

Published on May 5, 2017 05:08