• Flexible fuel pricing in arena

    The fuel retail market is heading towards dynamic pricing- where companies will charge different rates and even frequently change them according to demand and supply. India is set to implement the regime following the entry of global players such as Rosneft and BP Plc in petrol and diesel retailing, which is expected to give state-owned firms tough competition. “With international entities such as Rosneft OAO and BP Plc coming in the retail scenario, we might see dynamic pricing for petrol and diesel as competition is sure to increase,” a senior petroleum ministry official said.

    BP has recently got a licence to set up 3,500 fuel stations, while Rosneft has inherited 2,700 retail outlets, following a deal to acquire Essar Oil Ltd. Though the prices of domestic cooking gas and kerosene are fixed by the government, those of petrol and diesel have been deregulated. Dynamic, or real-time pricing, means the cost of a product can be flexible. It can be a market changing phenomena where other retailers may have to follow suit. Analysts said a price war might soon ensue at the petrol pumps, benefiting consumers of petrol and diesel.

    Globally, fuel retailing companies such as Shell, Caltex and Total sell petrol and diesel at varying prices in different locations to attract consumers. The same practice may soon come into force in the country with increasing competition in the sector. “As new players enter retail marketing, the pricing methodology is expected to change and global practices will be followed. Customer offerings and product differentiation will change. With crude oil prices going up, dynamic pricing will be seen, too. Retailers will track customer behaviour more closely to tailor offerings,” said Deepak Mahurkar, director (oil and gas) of PwC India.

    State-owned HPCL has already launched dynamic pricing at a few of its retail outlets on a pilot basis. It could be extended to other outlets at a later stage. “(The company) expects it to become a significant tool to sustain profitability/market share in the next 2-3 years as private competition strengthens,” Ambit Research said in a report. After registering the fastest pace of growth in 15 years, the country’s fuel demand is likely to rise 7.3 per cent in 2016-17, led by robust expansion in the consumption of petrol and diesel.

    Fuel consumption, which rose 10.9 per cent to 183.5 million tonnes (mt) in 2015-16, is projected to rise to 190.03mt, according to oil ministry estimates. Diesel demand, which soared 7.5 per cent to 74.6mt last fiscal, is projected to go up 7.7 per cent to 78.11mt. Petrol consumption is estimated to rise 12.4 per cent to 24.14mt. Richard Rodgers Jersey

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