JOIN USAs a further reform measure, state-owned oil marketing companies will peg their retail prices for petrol and diesel on a daily basis in five cities from May 1. The objective, apparently, is to align the pump rates with the international crude prices which change on a daily basis or even several times in a day, depending on the volatility which is influenced not only by mere demand-supply play but also by fast changing geo-political situation. Since the prices of Brent, West Texas Intermediate (WTI) or Dubai crude are generally denominated in dollar, any variation in greenback against a local currency in the foreign exchange market affects the landing or shipping costs, for both importers and exporters. For instance, the landed cost for auto fuel for India would not only depend on daily movement of crude in the international market but also on the dollar-rupee exchange rate. At times, both can be highly volatile, making it impera-tive for the rates to be adjusted commensurately.
In a deregulated market, Indian Oil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation revise their retail prices twice, on the first and 15th of every month, depending on the movement of crude as also the currency. At times, when the country is in an election mode, both for the Lok Sabha or state Assemblies, the price changes are stalled because of the Code of Conduct. So the system seems to be imperfect and not in sync with the fast-moving market realities, making it difficult for the retailers to adjust without a jerk to the consumers. To that extent, the shift to daily rate should be of help.
For starters, the daily rate change for the auto fuel would be effected in Puducherry, Visakhapatnam, Udaipur, Jamshedpur and Chandigarh. All these are non-metros with lower sales volume than Mumbai, Delhi or Bengaluru. It makes sense to have a first-hand experience in smaller cities than to risk any possible chaos in mega cities, which can be brought under the new pricing system later in a phased manner. On the face of it, the changeover looks good even for consumers who would get used to a smaller daily variation than a fortnightly one which could at times be a shock. Besides the implementation changes, the government-owned retailers must ensure that the consumers are not short-changed and the taxation both at the state and Central levels must be synchronised in a transparent manner. The temptation of pocketing the gains and passing on the losses must be avoided, as has happened in the past.