Now, switch on to FM station while driving. Your RJ may tell you where

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you can fill your car tank at the cheapest price. India will soon see dynamic petrol prices and better quality of services for customers.

Investments will start pouring into retailing sector of petroleum and in the long run customer will be the king. This is what experts feel about decontrol of petrol prices.

“In the short-term, there is obviously a marginal hit for a customer. But in mid to long-term it will be beneficial,” Ajay Arora, partner and national leader of oil and gas practices at Ernst & Young, India.

In the developed nations like the US, parts of Europe and Australia petrol prices are extremely competitive. They vary from one fuel station to another in the same city and even on a time to time basis. A sudden rush in weekend traffic may lead to a fall in prices by few dollars.

Generally, retailers such as ConocoPhillips, ExxonMobil, Shell and Total advertise their best prices through FM stations. In Philippines and other South-East Asian countries, prices are revised every fortnight.

“The sector will see rush of investments from private and government players. This will mean more retail stations and better services,” Arora said.

In India, more than 80 per cent of auto fuel retailing space is occupied by three state-run companies – IOC, BPCL and HPCL. Private retailers — Reliance Industries (RIL) and Essar Oil — have been able to capture about 17 per cent of the domestic diesel retail market and close to 10 per cent of petrol sales. They were forced to shut down their fuel stations when crude prices shot up in 2008.

On the other side, the changes coupled with the price increase for LPG and kerosene will have a positive impact on inflation. The government is already under pressure as food prices are rising and inflation hit 16.9 per cent. “In the short-term, the the hike will pinch a customer, but it will be positive in the long-term,” said Anubhuti Sahay, an economist at Standard Chartered Bank in Mumbai. “Cutting down on fuel subsidy bill will help the government divert funds to needy sections,” she added.

Finance secretary Ashok Chawla is on record saying that this month he expected the fiscal deficit to shrink to 4.5 per cent of GDP in fiscal 2011 if fuel prices were deregulated and on the back of other revenues, including the 3G spectrum auction. The finance ministry is optimistic that strong harvest following a normal monsoon would tame food prices.

“Our analysis suggests a direct impact of 63 basis points on headline inflation,” said ASV Krishnan, economist at Mumbai-based Ambit Capital.

For RBI, this should be fairly straightforward. The system faced with a temporary liquidity deficit should no longer matter. RBI would definitely move on the CRR to squeeze the liquidity – “ this liquidity squeeze may be temporary and the money may find its way back into the banking system in a month or so,” Ambit capital said in its report.

The Citigroup has said it expects RBI to revise rates. “The impacted fuels have a weight of 5.44 per cent in the WPI, measures would impact inflation by 100bps. This could result in inflation averaging 8 per cent levels in FY11 from 7.4 per cent estimated earlier.