Ratan Tata’s Legacy: How He Transformed India’s Auto...
- Oct 10, 2024
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The cost of petrol and diesel mainly depends on four parameters: Value Added Tax (state govt.), excise duty (central govt.), crude oil price in the international market and the American dollar. While the taxes don't fluctuate so often, the international pricing benchmark for the light sweet oil and the US dollar keep jumping and sliding almost every day.
Usually, the prices are revised twice every month if they are considerably out of proportion. Lower crude oil prices and a strong Indian rupee result in higher profits for the oil companies until the prices are updated. And the same rule works the other way around too.
This model could lead to either big profits or nominal losses for up to two weeks until the prices are updated again. The date to go live with this project isn't final yet, but all sources point towards a tentative date of May 1, 2017. The fuel prices will be revised every day to eliminate the risks the oil companies have to take and the rewards they can reap with fortnightly price revisions. For some time, only state-run retailers will have to update fuel prices (and their registers) in five cities. At a later stage, the process will be implemented nationwide in a phased manner. The five cities chosen for the first stage are Puducherry, Vishakhapatnam, Udaipur, Jamshedpur and Chandigarh.
The daily change will help keep the costs aligned with the international crude oil prices and the currency conversion rates. It will also eliminate the chances of big, overnight price fluctuations as there will only be moderate corrections happening on a regular basis.
In the recent past, after staying between $52 and $54 for the entire first quarter, the crude oil price dropped rapidly in the second half of March. During this period, several petrol pumps offered diesel at discounted prices to attract more customers, while still making a healthy profit. Once the revisions came into effect on April 1, the discounts disappeared. The prices in the international market have gone up since, resulting in marginal losses for the state-owned oil companies. The new method should put a stop to such instances eliminating any bi-weekly shocks/celebrations.
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