For the first time in the history of Delhi, diesel became costlier than petrol on Wednesday. The price of diesel was increased to a historic high of Rs 79.88 a litre, while that of petrol remained unchanged at Rs 79.76 a litre.
With the current hike, the price of petrol increased by a cumulative Rs 9.41 a litre in Delhi, while diesel increased by Rs 9.58 a litre in the last 18 days. This was after oil marketing companies freezing price revision for almost 83 days during the lockdown.
A major reason for the hike in Delhi was owing to a sharp increase in value-added tax (VAT) on diesel by the state government last month. The state government had hiked VAT on diesel from 16.75% to 30% and on petrol from 27% to 30%.
“This is the highest price for diesel in the history of Delhi and for the first time, diesel prices are seeing above petrol. In the last six-years, the price of diesel, that was traditionally considered as a backbone of the economy and in which the agriculture sector is heavily dependent on has sharply increased.
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Earlier, there used to be a consistent Rs 12 a litre difference between both the fuels,” said Ajay Bansal, President of All India Petroleum Dealers Association (AIPDA).
On April 16, 2014, soon after the first Narendra Modi government took charge, the price of diesel was as low as Rs 55.49 a litre in Delhi, which is inching closer to Rs 80 a litre now. On Tuesday, dealers indicated that demand too was on the lower side. Interestingly, over 66% of the price component of diesel in Delhi include Centre and State taxes.
“This hike in diesel is a temporary phenomenon. Traditionally, cracks of diesel and petrol were in the same range. However, diesel prices were lower on account of lower taxes.
This may lead to a demand-related slowdown and higher inflation too,” said K Ravichandran, senior vice-president, ICRA. He added that the disparity in Delhi is higher due to the higher state tax component compared to other cities. India’s annual diesel consumption is around 84 million tonnes.
Prices of diesel continued to be lower in Mumbai, Kolkata, and Chennai. In Mumbai, the price of petrol was seen at Rs 86.54 a litre, compared to Rs 78.22 a litre on diesel. In Kolkata, petrol price touched Rs 81.45 a litre, compared to Rs 75.06 a litre on diesel. On Chennai, it was Rs 83.04 a litre and Rs 77.17 a litre for petrol and diesel, respectively.
(By arrangement with Business Standard)