PNGRB plans petroleum products exchange

The Petroleum and Natural Gas Regulatory Board (PNGRB) is planning to facilitate the creation of an exchange for trading petroleum products such as aviation turbine fuel (ATF), naphtha, fuel oil and bitumen, in a bid to promote fair and transparent pricing in the domestic market.

"The concept is being designed to provide a transparent, efficient, and regulated environment for the trading of petroleum products, facilitating fair and transparent pricing, supply-demand balance, and market competitiveness," the downstream regulator said in its action plan for the current fiscal year.

PNGRB aims to put in place an enabling regulatory framework for the exchange, as is there for natural gas.


To begin with, Indian Gas Exchange-the sole physical delivery-based natural gas exchange in the country-may be permitted to launch trading of petroleum products, a PNGRB official said, adding that the aim is to help discover prices that reflect the domestic demand-supply situation in the most optimal way.

The proposed exchange is expected to cover a wide range of petroleum products such as ATF, naphtha, lubes, fuel oil, bitumen and petcoke, for which refiners currently either set periodic prices or sell through tenders.

The exchange, however, would not cover petrol, diesel or liquefied petroleum gas (LPG)-the most widely used refined products in the country-as their prices are determined by a government-defined mechanism. In future, however, if the pricing mechanism changes, even diesel and petrol can be sold on the exchange, the official said.

The regulator has also been pushing for turning state oil companies' petroleum product pipelines into common carriers, which would help the private sector move their products across the country.

In its action plan for this year, PNGRB has also set a target to develop "a comprehensive national distribution logistics plan" for petroleum products to "ensure efficient, reliable, and cost-effective distribution across the country with optimal utilisation of infrastructure".

With decades of investment, state oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum have built a massive distribution network across the country, backed by deep logistics infrastructure. The private sector, however, lacks that scale.

The regulator also wants to enable "co-retailing" of petrol and diesel at compressed natural gas (CNG) stations to "optimise the use of space and enhance the commercial viability of existing CNG stations". Most oil marketing companies already have at least some of their pumps dispensing CNG.