The Hindu : Fuel likely to be cheaper for consumers near refineries

Online edition of India's National Newspaper
Wednesday, Mar 17, 2004

Tamil Nadu

Tamil Nadu

Fuel likely to be cheaper for consumers near refineries

By N. Ravi Kumar

CHENNAI, MARCH 16. A radical change in the way commission for petroleum dealers is worked out is on the cards; it could also see consumers in the hinterland paying relatively more for petrol and diesel. An indication of the shift from a uniform commission to a system where various local factors will be taken into account is available in a recent Petroleum Ministry communication to national marketing companies.

In a deregulated scenario, the companies should be free to have their own negotiated dealer commission structure, giving weightage to the sales volume and location of the retail outlets - remote, far-flung or in urban area, it said.

The land ownership pattern of the petrol pump — company-owned, dealer-owned or third party lease - and the non-fuel activities will be other factors. The proposed system could signal the introduction of a differential pricing system for petrol and diesel, depending on the distance of the city from the coast. The cost will be less in a coastal city such as Chennai than in a land-locked Coimbatore.

The objective behind the move presumably is to pass on the transportation cost of the fuel from the refinery to the consumers, even while offering an incentive to those near the coast. Almost all refineries are located near the coast.

Presently, the government decides the dealer commission and the amount is built into the cost of the product. Oil industry sources, however, say it could be some time before the pricing and commission system comes into force, as the Ministry is apparently hesitant to take any major decision before competition from the private sector firms up.

The lack of competition - though firms such as Reliance and Essar have initiated marketing in a small way - is also proving a stumbling block to the national oil companies fixing petrol and diesel in tune with the international rates. The dismantling of the administered pricing mechanism for petroleum products — on April 1, 2002 — was to have been followed with the constitution of a regulatory authority for the oil industry, of which there are little signs. Seeking suggestions from national companies for switching to a new system for the dealer commission, the Ministry advised them to increase petrol and diesel commission to Rs. 707 and Rs. 425 on every kilolitre respectively. ``The increase in the commission may be adjusted in the next price revision,'' said the February 23 communication. The existing commission for petrol is Rs. 639/kl and for diesel Rs. 385.

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