The latest price cut by ₹2 a litre for petrol and diesel has narrowed the difference between the markets where rates are being revised every day and those where it is being done fortnightly.

Public sector oil marketing companies on Monday announced the fortnightly rates of petrol and diesel. The auto fuels are now cheaper by ₹2 per litre for customers across the country after the fortnightly revision.

But this substantial revision has not wiped out the price difference in regions where the daily fuel price revision is being implemented. The dynamic pricing mechanism has actually resulted in fuel being cheaper in the five cities where this is being implemented. Petrol price in Udaipur is the only exception to this trend, where the fuel is cheaper in Jaipur, a city with a comparable tax structure.

Since the price of petrol and diesel was revised every day in the five pilot cities, it had become cheaper by ₹1.50 a litre to ₹2 almost a week before the nationwide revision.

The daily fuel price revision had led to an initial difference of nearly 50 paisa a litre in diesel price when the pilot project started. This had distorted the market in neighbouring cities and fuel retailers feared losing customers if the gulf widened.

According to official release from Indian Oil, the price of diesel in Jamshedpur stood at ₹57.88/litre on May 15/16. In contrast, diesel price in Jharkhand’s capital, Ranchi, was ₹58.31/litre. The price of petrol in Jamshedpur was ₹67.60/litre on May 15/16. The petrol price in Ranchi was lower and the price was ₹67.79/litre for the fortnight till May 31.

The difference is also seen in Rajasthan. The price of diesel in Udaipur stood at ₹58.85/litre on May 15/16. In contrast, diesel prices in Jaipur was at ₹59.05/litre. The price of petrol in Udaipur was ₹68.33/litre on May 15/16. In contrast, petrol in Jaipur was cheaper at ₹68.29/litre.

In Visakhapatnam, petrol price on May 15/16 was ₹70.42/litre, and diesel stood at ₹60.55/litre, whereas in Hyderabad, petrol price was ₹69.74, while the price of diesel was at ₹59.87/litre.

This was because the prices were not aligned with the country in those cities where the pilot project is being implemented.

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 in place. In other cities, the average price of the last 15 working days is considered. Effectively, there is a difference in the pricing of fuel under both methodologies.

The price differential in outlets in union territories such as Chandigarh and Puducherry are greater due to nil State tax levies.

The benefits

But a ₹2/litre cut does benefit commercial consumers.

Truck rentals drop by 2 per cent immediately due to the diesel price cut and other factors, according to SP Singh, Senior Fellow and Coordinator at the Indian Foundation of Transport Research and Training (IFTRT).

In a press statement, IFTRT said, “The diesel price cut by ₹2.45/litre instantaneously results in truck rental cut by 2 per cent and above on trunk routes as National Permit holder trucks starts to returning medium/long haulage as harvesting season begins to taper off.”

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