State-run oil firms to revise petrol prices every two weeks
NEW DELHI: State-run oil firms will revise petrol prices every two weeks if domestic prices need to be aligned with international levels, as they prepare to replace the opaque pricing mechanism with a transparent and predictable system, top executives said.
Oil companies also clarified that petrol prices in India are indexed to Singapore gasoline rates. Government and company officials had earlier justified fuel price hikes by linking domestic pump prices to international crude oil rates.
"We review petrol prices every fortnight. We will ensure petrol prices will fall if international prices fall. If international prices rise, our prices will also rise," said RK Singh, chairman of Bharat Petroleum Corp Ltd.
A government official, however, said the oil ministry's intervention cannot be ruled out. "Oil is a sensitive commodity. The government has to keep a constant vigil. When petrol was decontrolled, it was decided that the government can step in any time if public interest is at stake," said the official on condition of anonymity.
Oil companies have faced flak for 13 consecutive petrol price hikes in the past year-and-a-half even though international rates have dipped at times. They now hope to demonstrate that petrol prices can move in both directions, and industry officials say the new system should help depoliticise the issue.
An industry official said oilcos were encouraged by the prime minister, who brushed aside political opposition to the November 4 petrol price hike and said he supported market pricing.
Petrol was decontrolled in June 2010, but in effect oil companies informally consult the oil ministry before revising prices. Ahead of assembly elections in key states, oil companies did not raise petrol prices despite higher international rates.
INTENSE POLITICAL PRESSURE
Industry executives say the oil ministry, which has direct administrative control over state-run firms in the sector, informally controls pricing decisions.
A top official of a state-run company said after two quarters of net losses by government-run oil firms, the companies had no choice but to exercise their pricing freedom and try to win support by occasionally cutting petrol prices. "We want to demonstrate by action that prices are revised every fortnight. If the government interferes, it will have to compensate us for any loss," said the official, who did not want to be identified.
Oil companies had unexpectedly raised petrol prices on November 4 by Rs 1.80 in Delhi, creating a political uproar and triggering angry reactions from political parties, including the Congress and its allies.
After prices were raised, Congress spokesman Abhishek Manu Singhvi had said: "We understand the plight of the people and call upon the government to provide a healing touch." In less than two weeks, oil companies cut petrol prices, and the oil industry official said the decision was taken under government pressure.
After political protests from allies, particularly Mamata Banerjee, the government immediately swung into action and - as reported by ET on November 7 - told oil marketing companies to find ways to cut petrol prices.
"The price reduction was predetermined. There was a nudge from the government. Only the quantum of the decrease was finalised after consultations between top executives of Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum on Tuesday," an executive directly involved in fuel pricing said.
Oil industry officials said they were worried the government's approach towards petrol prices would make it very difficult for the empowered group of ministers (EgoM) to agree to raise prices of controlled products such as diesel, cooking gas and kerosene.
State-run oil firms to revise petrol prices every two weeks - The Times of India
