Diesel burns hole in pocket, surpasses petrol in Delhi
Diesel has become the most expensive auto-fuel in the country overtaking petrol for the first time in a long while as the oil marketing companies on Wednesday raised its pump prices by 48 paisa while keeping the price of the other fuel unchanged.
 
In the Capital, diesel is now priced at Rs 79.88 per litre while petrol prices remains at Tuesday level of Rs 79.76 a litre. This makes diesel the most expensive auto fuel in the basket for the first time in the Capital.
 
IANS wrote on Tuesday that Diesel is expected to surpass petrol prices this week.
 
In other metros, however, diesel maintains the tag of cheaper of the auto fuels with price differential between diesel and petrol prices remaining at about Rs 8 litre in Mumbai, Rs 6 a litre in Chennai and Kolkata.
 
Due to differential taxation structure at both Centre and the states, diesel prices in the country has always remained much cheaper than petrol. Globally though, diesel is the expensive of the auto fuels as the product has higher cost of production.
 
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 per cent to 30 per cent and on petrol from 27 per cent to 30 per cent. This increased the retail price of Diesel and petrol in Delhi by Rs 7.10 and Rs 1.67 a litre, respectively. 
 
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.
 
"Diesel price movement is sharper in international market and if oil companies follow the global price trend, diesel prices will remain higher. It is after many years that this happened and is expected to sustain for some time unless government changes the tax structure on petroleum products again," said an oil sector expert from one of the big four audit and advisory firm asking not to be named.
 
Interestingly, even in India the base price of diesel is expensive than petrol. According to Indian Oil Corporation (IOC), while 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.
 
While 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," the the expert quoted earlier.
 
Yes, but for 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.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Petrol, Diesel Prices Rise Continues for 16th Straight Day
    Petrol and diesel prices continued to rise with the two auto fuels getting dearer by 33 paise and 58 paise per litre respectively on Monday.
     
    This is the 16th day of fuel price rise since June 7 when oil companies began the daily price revision mechanism after a hiatus of 83 days during the lockdown.
     
    With the latest increase, petrol is being retailed at Rs79.56 per litre and diesel at Rs78.85 a litre in Delhi. This is an increase of Rs8.30 in the the price of petrol per litre since June 7. Similarly, diesel prices have gone up highly by Rs9.46 per litre during the 16 day period.
     
    The good news is that auto fuel price rise may either stop or the quantum of increase could fall in the coming week as oil companies have now priced the products closer to international benchmark rates. There could be days when prices are not changed by oil companies. Already, the daily increase in price of petrol has fallen to 33 paise per litre level.
     
    Sources in oil marketing companies, however, said that price rise could continue for few more days as global product prices are firming up with a pick up in demand following opening up of economies across the globe post COVID-19 related lockdown. Even global crude prices have more than doubled from April levels to over $42 a barrel level.
     
    Also, OMCs are catching up on price levels that bring the product prices closer to international benchmark rates. The price freeze of 83 days even with a substantial increase in excise duty on petrol and diesel by the Centre, has increased the price gap resulting in losses on sale of product for OMCs.
     
    Prices of transportation fuel were last revised under the dynamic pricing policy on 16th March and there were few instances of price hike later only when the respective state governments hiked VAT (value added tax) or cess.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    rs235m

    3 months ago

    Reducing the interest rates on fixed deposits of banks and post offices and raising petrol diesel prices seem to be the easy ways to fill government coffers.To cover Covid expenses, government should have taken loan from world bank or IMF and repay over the next 5years.If black money from Switzerland was brought as promised,there would not have been any necessity to put the burden on common man. Why should public bear the burden of NPA, bank loot,Covid ,flood ,famine, earthquake etc?

    Ramesh Popat

    3 months ago

    indirect covid attack! inflation will show its ugly face shortly!
    will move middle class to corner!

    REPLY

    rs235m

    In Reply to Ramesh Popat 3 months ago

    Reliance is the biggest beneficiary of rock bottom crude price and fleecing of common man

    Petrol, diesel price rise may continue in June but quantum may reduce
    Consumers are unlikely to get respite from the rising price of auto fuels -- petrol and diesel as oil companies plan to cover their entire gap of around Rs 8 per litre on sale of the two petroleum products by raising retail prices daily for at least next two weeks.
     
    But the quantum of increase may fall from around 60 paise per litre, giving some respite to consumers in midst of several disruptions due to Covid-19 pandemic.
     
    After 83 days break since March 16, oil marketing companies have started raising petrol and diesel prices daily from June 7. In the nine days since then, petrol prices have risen by Rs 5 per litre while diesel prices have gone up by Rs 5.23 per litre. 
     
    Petrol price increased by 48 paise and diesel by 59 paise per litre to Rs 76.26 and Rs 74.62 per litre respectively on Monday in the national capital.
     
    Sources in public sector oil companies said that petroleum products may continue its daily upward movement till the end of the month or earlier but from now on the increase may be lesser by around 30-40 paise per litre. 
     
    "Global oil prices have again fallen below $40 a barrel and product prices have also decreased marginally. If this holds, there could actually be a reduction in petrol and diesel prices from next month," the official earlier said.
     
    As per a report from ICICI securities, while the current retail price hikes are encouraging, further price hike of Rs 5.5 per litre (7-8 per cent) is needed if net margin of oil marketing companies is to recover to Rs 1.19 per litre on July 1, 2020.
     
    While prices have now gone up by over Rs 5 per litre, the projected fall in OMCs net marketing margin would need petrol and diesel prices to rise by another Rs 4-5 a litre to make margins again.
     
    The OMCs could also get support from global oil market where crude prices have dropped to below $40 a barrel now. If this sustains, there is a possibility that petrol and diesel prices may actually begin to fall from July.
     
    Net auto fuel marketing margins are back in the black at Rs 0.2 per litre from minus Rs 1.28 per litre on June 6, 2020 due to retail price hikes. It has covered further ground after nine days of increase in auto fuel prices.
     
    Net marketing margin of OMCs slipped into the red to minus Rs 1.28 per litre during June 1-6, 2020 due to surge in refinery transfer price (RTP) by Rs 5.6-7.1 per litre from the low on May 1, 2020 and hike in excise duty by Rs 10-13 per litre, which was absorbed by OMCs.
     
    Net margin would be Rs 6.09 per litre in Q1FY21E if price hikes are made, but Rs 5.18 per litre if no further hikes are made. If price hikes are made, net margin may be Rs 2.17 per litre (down 2 per cent YoY) in FY21E assuming it at Rs 1.19 per litre in Q2-Q4.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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