The decision by state-owned oil companies to revise fuel prices daily from June 16 is not going down well with retailers, with inventory and automation among their primary concerns.
The new pricing mechanism would require automation of the 56,000 retail outlets in the country to reflect the changes in prices. According to Livemint, only around 20,000 are automated so far. This has led a section of petrol pump dealers to reportedly threaten to go on strike, but it is to be seen if any collective action will be taken.
Another grievance is inventory. Earlier, retailers used to anticipate the price changes and stock their inventory accordingly. With the switch to daily pricing, retailers are also anxious about the margins that could be lost on their current inventories.
Explainer: How Daily Revision Of Petrol, Diesel Prices Works
Retailers are also worried about the sentiment-driven price spikes that would occur due to international events of a geopolitical nature. Such spikes were ironed out during fortnightly price revisions.
Earlier, state-run oil marketing companies used to revise fuel prices every two weeks in accordance with crude oil rates.
But in keeping with the international practice, oil companies felt daily revision would make retail prices more reflective of the current market conditions and increase the transparency in the system.
On May 1, state-owned oil marketing companies including Indian Oil Corporation (IOC), BPCL (Bharat Petroleum Corporation Limited) and HPCL (Hindustan Petroleum Corporation Limited) began a pilot in five cities to change prices daily. After the success of the experiment, the companies decided to expand it nationwide with effect from this Friday.
How are OMCs gearing up?
Three major oil retailers - Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation - operate 90 percent of the retail outlets in the country,
At the non-automated petrol pumps, dealers would get the updated price by way of four distinct means including customised SMSes, e-mails, a mobile app and a web portal for dealers. IOC also plans to provide training to employees at the retail stations to ease the transition.