OMCs should hike diesel prices more often: Kirit Parikh

The oil ministry has started to urge state-run oil companies to revise petrol prices daily in-line with international rates and the rupee's value against the dollar . Currently, oil retailers like Bharat Petroleum , Hindustan Petroleum  and Indian Oil Corp revise petrol price every fortnight based on average regional bulk market prices and also after taking into account the value of the rupee against the dollar.

Speaking to CNBC-TV18, Kirit Parikh, former Planning Commission member and oil- and-gas expert, says that consumers have accepted revisions in petrol prices. "Daily petrol price revision is the right thing to do."

Highlighting that less frequent price revisions would lead to OMCS charging more, he recommends bulk diesel buyers to be charged at market rates. "OMCs should be allowed to hike diesel prices more frequently by 45 paise every fortnight."

Below is an edited transcript of the interview on CNBC-TV18

Q: Do you think it is feasible and practical for the government to move from fortnightly revision of petrol prices, to a weekly and perhaps a daily revision?

A: I don't see any problem in the government initiating a weekly or daily revision of prices. Just as the consumer is aware of the frequent change in vegetable prices, he will also take the daily change in petrol prices in stride. It is already clear that the frequent revision of petrol prices has not caused any significant problem and has been accepted by the consumer.

Q: Was this something discussed while formulating the report on deregulating the oil sector?

A: We had suggested that oil prices should be deregulated. But we did not go into the details as to the frequency of the change in prices. We recommended oil companies be allowed to change prices as and when it was necessary.

Q: Though global crude prices saw a sharp decline over the past fortnight, it did not affect the retail petrol prices. But what do you think will happen if global crude prices begin to appreciate sharply?

A: The consumer can't have it both ways- you want prices to come down when the international crude prices are going down, but you don't want let it come up when international crude prices go up.

The consumer has to understand that crude is a product that is imported in huge quantities at prices that change frequently. Of course, the oil companies adjust this by importing periodically. However, if there are a number of participants in the market, it will ensure that a reasonably good price will be set and in the long run, the consumer would benefit.

Q: Don't you think it is only fair that the government moves towards a daily price revision or at least a more frequent price revision when it comes to bulk diesel because you earlier mentioned that bulk diesel buyers have to pay market rates and yet you do not give them the benefit of a fall in prices because the prices are revised after a considerable period?

A: I agree that it should apply to bulk diesel buyers as well. Unfortunately, most of the bulk diesel buyers are public sector consumers like the railways and state transport corporations. Many of the private bulk buyers have found other ways to take care of this. However, nonetheless the principle should be the same for bulk diesel buyers as well as for petrol.

I would even argue that this whole idea of setting diesel prices no more than 45 paise should be relaxed. Oil marketing companies (OMCs) should be permitted to change prices more frequently than once a month if necessary.

Q: Will the oil ministry be able to implement a daily revision in petrol prices?

A: The decision is usually taken by the Cabinet. In the past, the ministry of petroleum and natural gas was unable to implement such initiatives. It will be very difficult to predict what will happen.