• Three Minutes

Surge in Diesel Prices

For the first time, diesel has become costlier than petrol in India. The rate of diesel is Rs 79.88 per litre and petrol Rs. 79.76 per litre in New Delhi, as oil marketing companies on Wednesday, last week, raised pump prices of diesel by 48 paise, while keeping the price of the other fuel unchanged.

Fuel rates vary from city to city and even from one petrol pump to another, depending on the transportation cost and local taxes. Besides, rates can also vary from one oil marketing company to another.

The increase in fuel rates started on June 7 this year as oil companies resumed daily revision in prices in line with costs after ending an 82-day gap during the Covid-19 lockdown. It has taken diesel prices to fresh highs and petrol price too is at a two-year high.

In June 2017, state-run fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum switched to daily price revision from a fortnightly pricing system. And since the dynamic fuel pricing system began, the gap between the prices of the two fuels has been narrowing.

Higher levies imposed by the Centre and various state governments also contribute to the higher retail price of diesel.

People aware of the development said the fuel prices may soon cross the Rs 80 per litre mark soon as international oil prices continue to surge.

In Delhi, the diesel price is more than petrol because the state government had hiked VAT on diesel from 16.75% to 30% and on petrol from 27% to 30% last month. This led to a hike of ₹1.67 a litre on petrol while the impact on diesel was much higher at ₹7.10.

Another factor impacting fuel rates are international benchmark rates. The base price of petrol in Delhi is ₹22.11 per litre while for diesel it is a bit higher at ₹22.93 per litre.

For the 18th day in a row, state-run oil companies on Wednesday raised the prices of diesel. A comparison with the global scenario shows that diesel has been the most expensive of auto fuels as the product has a higher cost of production in many foreign countries.

Even in India, the base price of diesel has been higher than petrol. However, diesel has always been cheaper because it is used by farmers along with truck and bus fleets. Thus, to reduce the burden on farmers and transport fleet operators, diesel is priced lower than petrol in India.

Hemlata Dhyani, General Manager, Competent motors, Maruti Suzuki told India Today, "Following the Supreme Court order of prohibition of registration of BS-IV vehicles after May 10, registration of BS-VI vehicles has started taking place. This has had an impact on automakers as many have stopped manufacturing diesel vehicles. Very few companies are making BS-VI standard of diesel cars because it's costlier."

"Recent times has seen an attitude change also, people now prefer petrol, electric, CNG or other alternative fuel cars over diesel ones," Dhyani added.

However, the movement of retail pricing is being seen with a sigh of relief by vehicle owners whose cars run on petrol, those buying the relatively expensive diesel cars are now repenting on their decision. The development is also being seen with caution by automobile companies who have spent millions to ramp up their facilities for diesel-run vehicles. The expectation is that demand for such cars will now fall causing more damage to companies where sales are already impacted due to persistent economic slowdown and now the spread of COVID-19 pandemic.

The pricing development would push automobile companies to apply strategies being followed by companies in western markets where diesel-run cars are not sold on fuel pricing differential but on overall make and quality that puts them ahead of petrol run cars.

Yes, but for the commercial vehicle sector, the rising price of diesel had not been welcomed. In fact, the commercial transport sector had time and again threatened strike against the move to raise fuel prices.

At present, diesel vehicles account only for 15 per cent of the total automobile market.

However, customers are worried as many feel that the increased prices of fuel will burn a bigger hole in their pockets.

9 views0 comments

Recent Posts

See All