Why diesel has become more expensive than petrol in Delhi

TIMESOFINDIA.COM | Updated: Jun 24, 2020, 18:39 IST

NEW DELHI: Diesel has become the most expensive auto-fuel in the capital overtaking petrol for the first time in a long while as the oil marketing companies on Wednesday raised its pump prices by 48 paise while keeping the price of the other fuel unchanged.

For the 18th day in a row, state-run oil companies on Wednesday raised prices of diesel. However, no increase was witnessed in petrol prices.
Oil marketing companies have been adjusting retail rates 'in line with costs' after an 82-day break from rate revision amidst the Covid-19 pandemic. These firms on June 7 restarted revising prices in line with costs.
Due to different taxation structure at both Centre and the states, diesel prices in the country has always remained much cheaper than petrol.
Globally, diesel is the expensive of the auto fuels as the product has a higher cost of production.
Even in India, the base price of diesel has been higher than petrol. However, diesel has always been cheaper because it is believed to be generally used by farmers and truck and bus fleets. It was also believed that petrol is used by cars and motorcyles once considered luxury vehicles. Thus, to reduce the burden on farmers and truck and bus fleet operators, diesel is priced lower than petrol in India.
According to Indian Oil Corporation, while the base price of petrol in Delhi currently comes to Rs 22.11 per litre, the same for diesel is higher at Rs 22.93 per litre (effective from June 16, 2020).
This has been the case for a long time but retail prices of petrol came higher than diesel due to central and state taxes.
What has now made diesel prices higher in the capital is the Delhi government's decision early May to increase Value Added Tax on diesel from 16.75% to 30% and on petrol from 27% to 30%. This increased the retail price of Diesel and petrol in Delhi by Rs 7.10 and Rs 1.67 a litre, respectively.
The decision to increase the prices was apparently to make up for the massive losses incurred due to the coronavirus-induced lockdown.
With central taxes on the two products already reaching identical levels, the Delhi governments move hastened price parity between petrol and diesel. Currently, the central excise on petrol is Rs 32.98 a litre while that on diesel it is Rs 31.83 a litre. VAT on petrol in Delhi is Rs 17.71 a litre that on diesel is Rs 17.60.
In other metros, however, diesel continues maintains the tag of cheaper of the two auto fuels with the price difference between the two being Rs 8 litre in Mumbai, Rs 6 a litre in Chennai and Kolkata.
Since 2014, the Central Government has increased the excise duty on petrol from Rs 9.20 per litre to Rs. 23.78 per litre and on diesel from Rs 3.46 per litre to Rs 28.37 per litre. This translates to an 820% hike in excise duty on diesel and a 258% increase in excise duty on petrol.