Government to decide on the mechanism of regularly revising petrol prices

The government has called for a meeting of the three state-owned petroleum retailing companies on Thursday to decide on the mechanism of regularly revising petrol prices, Murli Deora, minister for petroleum and natural gas said.

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Deora, who was inaugurating a new scheme to provide consumers gas cylinder at the time of their choosing, said it was up to the companies to decide on the exact mechanism, including whether they should keep the prices in tandem with each or not.

The government had, two weeks ago, announced that it will no longer control the price of petrol, allowing private and state-owned companies to set their own prices and inviting widespread protests. It left the decision of how often the companies should raise the price to the companies themselves.

"It is up to them.. We are not deciding it," Deora said, when asked about the frequency of revisions.

While consultations have been going on amongst and between the three state-owned companies, which control around 95% of the market, and the two big private retailers, a consensus is yet to evolve about the pricing mechanism.

Officials are also worried about whether a joint price fixing will amount to collusion and cartelization, according to India's new competition laws. India's recently enacted Competition Act bans companies from consulting each other before fixing the price of their products.

Some oil marketing firms, especially the state-owned companies, are known to favor a centralized 'price fixing' to lessen the competition and prevent large scale migration of customers from public-sector to private retailers.

Private sector players, who have mega plans of winning over customers from the state-owned firms, are unlikely to join the 'pricing alliance'.

Petroleum secretary S Sundaresan also hinted that the companies may re-adjust their prices on Thursday, July 15, to keep them in line with international crude prices.

"We will have a view on the projection of price [in Thursday's meeting]," he said, reminding that prices may also go down, if international crude oil prices decline.

The petroleum ministry also unveiled a new scheme by the the three state-owned oil companies -- Indian Oil, Hindustan Petroleum and Bharat Petroleum -- for customers to request gas cylinders at a time of their own choosing. Depending on the time of delivery and the location, customers will have to pay Rs 20 to Rs 50 extra per cylinder for using the service.

Deora's deputy Jitin Prasada also said the ministry is in talks with the finance ministry on picking up the tab for a Rs 490 crore scheme to provide cheaper gas connection to 35 lakh lower income households in rural areas.

"The planning commission has already agreed to fund 50% of the cost.. We are trying to find out whether the finance ministry or oil marketing companies will pay the remaining," Prasada said.

The new scheme involves giving a rebate of Rs 1,400 per new gas connection to low income households, bringing down the cost of connection to around Rs 700-800.

Prasada, however, did not reveal whether the ministry has any plans to prevent the widespread practice by gas agencies of slapping on extra charges in the name of 'mandatory' purchase of gas stoves from the agency itself.
Source http://www.dnaindia.com/money/report_new-petrol-pricing-mechanism-on-thursday_1409230