Oil marketing companies are planning to put in place a mechanism under which fuel prices (petrol and diesel) will be aligned to international crude oil prices on a daily basis.
The effect: You will have to check petrol and diesel prices daily before refuelling your vehicle.
In fact, according to a Reuters report, state-owned fuel retailers plan to implement daily revision of fuel price in five cities from May 1 ahead of a nationwide rollout of the scheme, industry sources said.
To begin with, daily revision of fuel prices will be implemented in Puducherry and Vizag, Udaipur, Jamshedpur and Chandigarh, they said.
Currently, oil marketing companies decide on change in fuel prices on a fortnightly basis.
Let's examine the impact of the proposed change in fuel prices on a daily basis.
The government deregulated petrol price in 2010 and diesel price in 2014. It, henceforth, allowed oil marketing companies to decide on the prices of fuel, considering the change in international oil prices and currency exchange rate.
Since oil marketing firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are state owned, they are often not allowed to raise prices in the election season since it would prove detrimental to the prospects. To compensate oil companies for that, the government allows them to charge higher prices even when international oil rates have fallen.
Assembly elections in five states-Uttar Pradesh, Punjab, Goa, Manipur and Uttarakhand- were held during January to March 2017.
Oil marketing firms raised petrol and diesel prices by Rs 1.29 per litre and 97 paise on January 2, 2017. They cut price of petrol by Rs 3.77 per litre and that of diesel by Rs 2.91 a litre on April 1, 2017, the first change in rates in two-and-a-half months even though currency exchange rates and international crude oil prices fluctuated by wide margins during the period.
But the decision to change fuel prices everyday will less likely invite interference from political parties to address their interests. Even if they would interfere with the price change, they will not be able to defer the decision for long due to the urgency to revise prices daily.
No shock to customers
The revision in oil prices will not affect consumers much as international oil prices do not fluctuate widely on a daily basis. So, change in prices of petrol and diesel will not badly affect the commuters in the long run. They may be in for a surprise if some major international event affects the price of crude oil and its effects are felt on diesel and petrol prices in India.
Effect on inflation
The new practice will add one more factor to the change in price of essential commodities such as food items, cereals, fruits and vegetables. The prices of essentials may fluctuate on a daily basis, if the mechanism of daily change in fuel prices comes into effect.
Books of accounts
The price movement will immediately reflect on the book of accounts of oil marketing firms, allowing them to reduce or make provision for losses or profit arising out of sale and purchase of fuel on daily basis. Maintaining sales and cash receipts journals will become a lengthier process after due to daily change in prices of fuels.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today