Petrol-diesel price differential narrows down to Rs 12 a litre

The higher price increase in diesel as compared to petrol has resulted in the two fuels getting closely priced.

By Ujal Nair

03 May 2018

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The current price difference between petrol and diesel is Rs 12.28 a litre, the narrowest it has got since 2017.

All is not well on the global crude oil market front, what with crude oil prices scaling upwards of $70 a barrel as a result of geopolitical issues, and OPEC and Russia reducing supplies.

For India, the world’s third largest importer, and its vast populace of motorists, this spells bad news both in terms of tanking up on fuel and from the general inflation point of view. As is known, in the past fortnight, prices of petrol and diesel in the country have surged and are currently running at Rs 82.48 for a litre of petrol (the highest in 55 months) and Rs 70.20 a litre for diesel (a 44 month high after Rs 67.26 per litre in August 2014).

The current price difference between petrol and diesel is Rs 12.28 a litre, the narrowest it has got since 2017 (see detailed chart below). What’s also apparent is that within three years, the price of petrol per litre has risen by Rs 11 a litre, while diesel, once touted as the ‘common man’s fuel’ is costlier by Rs 15 a litre.

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Highlighting the price difference on some key dates over the two years

While petrol prices were decontrolled on June 25, 2010, diesel prices were decontrolled on October 18, 2014. In that four-year-period, the price differential between petrol and diesel was the highest on May 24, 2012, at Rs 34.62 a litre, and the lowest at Rs 9.15 a litre on August 31, 2014.

Currently, petrol is retailed with an excise duty of Rs 19.48 per litre over the base charge. The VAT commissioned on them is Rs 15.87 per litre (Delhi). Similarly, diesel has an excise duty of Rs 15.33 per litre and a VAT of Rs 9.71per litre.

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Graphical representation of the key price differences in Mumbai over the years

As per the graph depicted above, in a span of 12 months after 16 July 2015, the price differential between petrol and diesel narrowed by Rs 9.31 to Rs 7.51 a litre. At the end of 2016, the differential between the two fuels was Rs 12.87. The highest difference in two years –Rs 17.08 – was on 15 September 2017.

Fuel prices have remained surprisingly unchanged since April 24 (not that motorists are complaining), despite the rise in global crude prices as well as rupee-dollar exchange rates. This is understood to be a result of the government not wanting fuel pricing to become an issue on account of the upcoming Karnataka polls. As such, motorists continue to pay the same rate they did a week ago.