Petrol and diesel will cost less in coastal areas than inland locations if Petroleum Minister Ram Naik approves a differential pricing policy based on the cost of transportation of the fuel from the nearest port to the sale point.

"Competition from private firms on sale of diesel and petrol to bulk customers at cheaper rates is forcing the government to change the pricing policy," official sources said.

Currently, freight costs are averaged out to equalise the selling prices at different locations. However, this has made imported fuel cheaper than domestic petrol and diesel in coastal regions, resulting in public sector oil firms losing market to companies like Essar Oil.

Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation have been demanding implementation of the Import Parity Pricing policy whereby inland prices are arrived at by including the transport cost on the ex-storage prices at the nearest port refinery.

"The policy has been put up to the petroleum minister for approval," they said.

If cleared, petrol and diesel in coastal cities like Mumbai, Vizag, Chennai and Kochi would be cheaper than Delhi, Lucknow, Bhopal and Nagpur.