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NewsMobile Explainer: Diesel price at Rs 80/ltr in Delhi: Why are prices seeing a sharp rise

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Price of diesel has been hiked for the 19th consecutive day which has driven its retail price to Rs. 80/litre in Delhi. So now for the first time ever diesel is more expensive than petrol in the capital which is priced at Rs. 79.9/litre. This has happened because the state government had raised local sales tax or VAT on diesel sharply last month. It costs less than petrol in other cities.

Are only rising international crude prices to blame?

But the question arises why have fuel prices been rising for nearly 20 days on the trot? Till April end Brent crude prices were wallowing in their teens, after the US traded WTI crude fell into negative on April 21. Prices at the pump certainly didn’t fall to near zero in India around the same time. Lets say, at the pump if you pay Rs. 100 a litre for petrol. Here Rs. 70 is just taxes collected by both states and the centre. This after the government hiked excise duty on petrol by Rs 10 and diesel by Rs 13 on May 6, 2020.

 

Daily pricing of fuel, but prices remain unchanged for 82 days

Price of petrol and diesel is revised daily after dynamic fuel pricing came in about 3 years ago. But when WTI crude fell into negative, petrol prices remain unchanged around Rs 69/litre. Oil marketing companies did not revise fuel price for 82 days till June 7 even when excise duty was hiked. So consumers were spared a huge hike in fuel prices when excise was increased. So now a small price increases over nearly 20 days has been done to make up for the excise hike and the rise in international crude prices.

ALSO WATCH: http://newsmobile.in/articles/2020/06/25/top-five-business-stories-on-thursday-3/

OMCs saved their bottomlines, Government mopped up revenues

Because of the lockdown, even if prices had been cut, it would not have made a difference to one’s budget and very few people were on the roads. This has also caused tremendous loss to the oil marketing companies (OMCs). In order to take care of those losses, OMCs did not pass on benefits to pass on to the retailers, and are instead using low crude oil prices to offset their own losses. Excise hike on fuel has also helped the government mop of revenues when demand and hence taxes crashed during the lockdown. The government has collected about Rs 40,000 crore from excise duty on petrol and diesel.

 

So with various central and state levies on fuel prices, dynamic pricing also gives only limited relief.

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