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Why Diesel Prices Are So High In India?

Mr. C.S. Sudheer | Updated On Friday, July 20,2018, 09:23 AM

4.6 / 5 based on 58 User Reviews

Why Diesel Prices Are So High In India?

 

 

 

The price of Diesel in Delhi has hit Rs 67.38 a Liter. It’s Rs 71.52 a liter in Mumbai. Diesel is more expensive compared to Petrol at the refinery level. The cost of Diesel in India is more than Pakistan.  Why is Diesel so important to India? Trucks which transport essential items run on Diesel. If Diesel prices shoot up, prices of vegetables, fruits and all essential items will shoot up. This will fuel inflation in India.

Trucks owners even went on an indefinite strike to protest against high diesel prices. So why is Diesel so expensive in India? Want to know more on Investment Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

 

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Why Diesel Is So Expensive In India?

Let’s face it. International Crude Oil Prices are rising. Brent Crude is around $76 a Barrel. India imports more than 80% of its crude oil requirements, but is the World’s third largest consumer behind the US and China. Take a look at this fact. A single dollar rise in the price of crude will increase India’s import bill by Rs 10,000 Crores a year. But, apart from high crude oil prices, is something else pushing up Diesel Prices in India?

 

1. Diesel prices are deregulated

The Government of India deregulated Diesel prices in 2014. The prices of Diesel are market determined at both the retail and the refinery gate level. State Owned Oil Marketing Companies popularly called OMCs like IOC, HPCL and BPCL are allowed to freely price Petrol and Diesel as per market conditions which are International Crude Oil rates and Rupee vs Dollar exchange rate.

But there’s a catch. The Government is known to interfere with the pricing during the election season called political interference. When International crude oil prices rise, the Government forces OMCs to sell petrol and diesel at lower prices. This restricts the profits of these OMCs as the Government cannot allow OMCs to profit at the cost of the common man. To compensate for losses OMCs are allowed to hike prices when International Crude Oil prices fall.

SEE ALSO: Why Is Petrol So Expensive In India?

 

2. Are diesel prices high because of taxes?

Believe it or not, taxes are the main culprit behind the high diesel prices in India.

This table shows the components of diesel prices in Delhi:

 

 

This table shows the Diesel price in Delhi as on 3rd June 2018. The Central Excise is Rs 15.33 and the State VAT is Rs 10.17. Central Excise + State VAT is Rs 15.33 + Rs 10.17 = Rs 25.50. Taxes have increased diesel prices by a whopping 68%.

See Also: Will GST Reduces Petrol Prices?

Both the Center and the States earn a lot of revenue on Petrol and Diesel. Will they forego all this revenue and bring Diesel under GST. Lets find out. Be Wise, Get Rich.

 

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Article Author

Mr. C.S. Sudheer

Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.

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