NEW DELHI: By the time you read this, diesel will cost Rs 79.88 per litre and petrol Rs 79.76 per litre in Delhi on Wednesday, the first time former has overtaken the latter anywhere in the country as state-run oil companies raised prices for the 17th day in a row.
In other states, the prices will also rise but diesel will still continue to be cheaper due to lower taxes levied by other states, though the gap between the prices will shrink further.
Government data shows the gap at its widest at Rs 30.25, or nearly74%, on June 18, 2012 when petrol cost Rs 71.16 a litre and diesel Rs 40.91 in Delhi. In Mumbai, the gap was widest at Rs 31.17 on June 28 the same year when petrol sold at Rs 76.45 a litre and diesel Rs 45.28.
Diesel prices traditionally trailed petrol by a wide margin because of the way it used to be taxed by the Centre and states. Both kept tax on diesel low as it is mainly consumed by transporters and farmers.
But since fuel pricing was deregulated in October 2014, the difference in the Central taxes has narrowed but states still keep it on the lower side. In Delhi, for example, taxes account for 64% of petrol price and 63% of diesel price. But taxes on diesel in other states are lower. This is why the price gap in other states is still wider.
For example, fuel taxes in Delhi were among the lowest in the country till April, while state levies in Mumbai were among the steepest. This reversed after the Delhi government jacked up VAT on diesel to 30% from 16.75% May 4, which keeps diesel prices higher than Mumbai. VAT on petrol was also raised to 30% from 27% but it is still lower than Mumbai. As a result, petrol price rose by Rs 1.67 a litre but diesel spiked by Rs 7.10.
Diesel has been catching up slowly ever since the daily price revision was introduced in June 2017. The consecutive price hikes and the rebound in global diesel prices outpacing petrol, as economic activities resume globally, have hastened the process.
The retailers have cumulatively raised petrol prices by Rs 9.21 and diesel by Rs 9.03 a litre in 17 days. This marks an increase of 14% in petrol and over 26% in diesel prices since they resumed daily price revision on June 7 after a gap of 82 days. According to industry figures, global rates of petrol, or ‘motor spirit’ in trade parlance, have risen about 4% and diesel, or ‘HSD’, by about 7-8%, during this period.
Clearly, the retailers are trying to regain margins they lost by absorbing the two excise duty hikes and inventory losses during the Coronavirus lockdown, when oil prices crashed to 21-year lows and products became cheaper than crude.