Petrol and diesel prices in India will be revised daily from June 16 throughout the country to counter undercutting by private retailers and bring India at par with the US oil market. The move follows successful implementation of a month-long pilot run in Udaipur, Jamshedpur, Puducherry, Chandigarh and Vishakhapatnam from May 1. Public sector retailers have so far been revising prices on the 16th and last day of each month - except in these cities - on the basis of average prices of crude and products in regional bulk markets as well as rupee-dollar exchange rate in the preceding fortnight.
The idea of daily revision has been on the oil ministry's table since 2012. But state-run retailers, in a complacent market of high oil prices, subsidy and lack of competition, were loath to implement the idea, citing lack of connectivity and infrastructure in the hinterland. Petrol pricing was freed from government control in June 2010 by the UPA government. The NDA government deregulated diesel pricing in October 2014.
A daily revision is expected to take the sting out of price hikes as they would be in small doses - sometimes could even go unnoticed. But more than that, the move has the potential to set off a price war and bring real competition in a market, 95% of which is controlled by public sector retailers. Revising prices daily will give public sector retailers a chance to match private companies who have been undercutting them in a free market. The private refiner-retailers have been offering discounts - sometimes up to Re 1 litre - taking advantage of their operational efficiency, coastal location of refineries and freedom in buying crude.
Politically, a daily revision will help the government sidestep the political fallout of consumer ire that may follow a steep revision. It will also largely free state retailers from government intervention on the matter to suit political considerations. Technically, oil companies have been free to revise rates since deregulation. But it is common knowledge that they have been “guided” by the parent oil ministry in line with the ruling dispensation's political considerations.