Dynamic fuel pricing deepening deregulation: Jefferies

Updated on : Apr 13,2017   5:08 pm

New Delhi, April 13 (IANS) The proposed daily pricing of transport fuels in India would improve confidence in the sustainability of the market pricing regime as regular smaller changes in currency and crude oil prices should be easier to pass through to customers, US investment banker Jefferies said on Thursday.

"Daily pricing would improve confidence on sustainability of deregulation, as regular smaller changes should be easier to pass through if crude prices rise or rupee depreciates sharply," Jefferies said in a report.

"Post diesel deregulation in October 2014, this is the next major step forward for the marketing business of oil marketing companies," it added.

The All India Petroleum Dealers' Association on Wednesday said the state-run oil marketers plan to roll out a dynamic fuel pricing pilot project from May 1 in five cities where transport fuel prices would be changed daily so as to better cope with volatility in global crude oil prices.

The decision was taken by Petroleum Minister Dharmendra Pradhan following a meeting here with officials of the three oil marketing companies (OMCs) -- Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum.

"It might also reduce government intervention," the American agency said and noted that despite deregulation, state-run OMCs "have refrained from raising prices around major state elections, including the most recent Uttar Pradesh elections."

"Daily pricing should give OMCs better flexibility and control, which should be positive for marketing margins in the medium to long run."

Under the pilot project, the companies will change the price of transport fuels everyday based on crude price movements. Dynamic pricing is followed in many developed countries.

The project is to be implemented in the cities of Puducherry and Vizag in southern India, Udaipur in the west, Jamshedpur in the east and Chandigarh in the north.

Meanwhile, the Indian basket, comprising of 73 per cent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, closed trade on Wednesday at $54.92 for a barrel of 159 litres.