State-run oil companies Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) started selling petrol and diesel in sync with international rates from Friday.
These government-run firms, which have around 90% share of the Indian fuel retail market, adopted the new dynamic pricing model after trying it out since 1 May in Udaipur, Jamshedpur, Puducherry, Chandigarh and Visakhapatnam. Private firms such as Reliance Industries Ltd and Essar Oil Ltd are also present in the Indian retail fuel retail market.
India now joins countries such as the US and Australia where diesel and petrol prices move in tandem with the price of crude oil. The National Democratic Alliance (NDA) government’s move comes at a time when the crude oil prices are subdued and below $50 per barrel.
The price of crude oil in the Indian energy basket was $46.48 per barrel on Wednesday. The Indian energy basket represents the average of Oman, Dubai and Brent crude. This may be the first step in the complete overhaul of the Indian fuel retail market.
This assumes significance given that India’s energy import bill of around $150 billion is expected to reach $300 billion by 2030. India imports around 80% of its crude oil and 18% of its natural gas requirements. India imported 202 million tonnes of oil in 2015-16.
India has a very important role in the global energy market. China and India accounted for half of the 1% growth in the global energy demand in 2016, which was around half the average growth rate of the past decade, according to the BP Statistical Review of World Energy released on Tuesday. India maintained its energy demand growth at 5.4%, with the jump in global oil consumption driven primarily by India and Europe.
“Apart from reducing volatility, this move will ensure that there is no sudden increase or decrease in domestic selling prices. The benefit of even the smallest change in international oil prices can be passed down the line to the dealers and the end-users. The daily price revision is an initiative for ensuring the best possible prices to the customers as well as improved transparency in the pricing mechanism,” Indian Oil said in a statement.
This comes at a time when India is also working to create a state-run behemoth by merging various public sector firms in the oil and gas sector in the backdrop of concerns articulated over rising oil prices presenting a challenge to the country’s growth.
“The initiative also looks at better daily inventory management by both OMCs and the dealers and prevent surges or declines in purchasing pattern at the end of the fortnight depending upon the market perception of upcoming increase or decrease in prices,” the Indian Oil statement added.