In a first, diesel costlier than petrol in Delhi after 18 hikes in a row


Indian Express

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In a first, diesel costlier than petrol in Delhi after 18 hikes in a row

The 18th daily increase in rates since oil companies on June 7 restarted revising prices in line with costs after ending an 82-day hiatus in rate revision, has taken diesel prices to fresh highs. Diesel now costs Rs. 79.88 per litre in Delhi as compared to petrol price of Rs. 79.76 a litre.

Diesel price for the first time in living memory crossed the rate of petrol in the national capital on Wednesday when prices were raised for a record 18th day in a row.

According to a price notification of state oil marketing companies, petrol price was unchanged after 17 consecutive increases, while diesel rates were increased by 48 paise per litre across the country.

Diesel now costs Rs. 79.88 per litre in Delhi as compared to petrol price of Rs. 79.76 a litre.
Rates differ from state to state depending on the incidence of VAT. However, diesel is costlier than petrol only in the national capital where the state government had raised local sales tax or VAT on the fuel sharply last month.

Petrol costs Rs. 86.54 a litre in Mumbai and diesel is priced at Rs. 78.22. In Chennai, a litre of petrol comes for Rs. 83.04 and diesel for Rs. 77.17. In Kolkata, petrol is priced at Rs. 81.45 per litre and diesel costs Rs. 75.06. In Bengaluru, petrol comes for Rs. 82.35 a litre and diesel for Rs. 75.96. In Hyderabad, petrol is priced at Rs. 82.79 a litre and diesel at Rs. 78.06.

Traditionally, diesel was priced Rs. 18-20 a litre lower than petrol due to lesser taxation. But over the years, the taxes have increased, narrowing the gap.

The Delhi government had on May 5, hiked Value Added Tax (VAT) on diesel from 16.75 per cent to 30 per cent and on petrol from 27 per cent to 30 per cent. Since the levy is ad valorem, the actual incidence has gone up every single time oil companies raised retail selling price in the last 18 day.

The 18th daily increase in rates since oil companies on June 7 restarted revising prices in line with costs after ending an 82-day hiatus in rate revision, has taken diesel prices to fresh highs. In 18 days, diesel price has gone up by Rs. 10.49 per litre. Petrol price had risen in the past 17 days by Rs. 8.5 a litre.

The increase in rates since June 7 is the highest in any fortnight. When petrol and diesel pricing was deregulated in April 2002, oil companies revised rates every fortnight in line with the cost. They switched to daily price revision in May 2017 to allow cost to reflect instantaneously in retail rates.

According to pricing data, the maximum rates have increased in any fortnight was Rs. 4-5 per litre.

Prior to the current rally, the peak diesel rates had touched was on October 16, 2018 when prices had climbed to Rs. 75.69 per litre in Delhi. The highest ever petrol price was on October 4, 2018 when rates soared to Rs. 84 a litre in Delhi. When rates had peaked in October 2018, the government had cut excise duty on petrol and diesel by Rs. 1.50 per litre each. State-owned oil companies were asked to absorb another Re 1 a litre to help cut retail rates by Rs. 2.50 a litre.

Oil companies had quickly recouped the Re 1 and the government in July 2019 raised excise duty by Rs. 2 a litre.

Taxes make up for nearly two-third of the retail selling price. As much as Rs. 50.69 per litre, or 64 per cent, in petrol price is due to taxes – Rs .32.98 is the central excise duty and Rs. 17.71 is local sales tax or VAT. Over 63 per cent of the retail selling price of diesel is taxes. Out of the total tax incidence of Rs. 49.43 per litre, Rs. 31.83 is by way of central excise and Rs. 17.60 is VAT.

The 82-day freeze in rates this year was imposed in mid-March soon after the government hiked excise duty on petrol and diesel to shore up additional finances.

The government on March 14 hiked excise duty on petrol and diesel by Rs. 3 per litre each and then again on May 5 by a record Rs. 10 per litre in case of petrol and Rs. 13 on diesel. The two hikes gave the government Rs. 2 lakh crore in additional tax revenues.

Oil PSUs Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) instead of passing on the excise duty hikes to customers adjusted them against the fall in the retail rates that was warranted because of fall in international oil prices to two decade low.

International oil prices have since rebounded and oil firms are now adjusting retail rates in line with them.

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