Diesel crosses Rs 100-a-litre mark in Mumbai

by Ajit Dalvi 09 Oct 2021


Everything official about it. October 9 is when the price of diesel, once touted as the ‘common man’s fuel’ crossed the Rs 100-a-litre mark in Mumbai. As per Indian Oil Corporation’s pricing as of this morning, diesel costs Rs 100.29 a litre in the financial capital.

As correctly forecast by Autocar Professional on October 6, it took just another three days for diesel to hit the ‘century. Diesel’s century comes a little over four months after petrol hit its own ‘century’ on May 29, going to Rs 100.19 a litre.

In a span of nine days, from October 1-9, a diesel-litre has become costlier by Rs 2.45 a litre in Mumbai, by Rs 2.30 in Delhi, by Rs 2.19 in Chennai and by Rs 2.31 in Kolkata. The speedy price increase in diesel – more than petrol – is playing havoc particularly with commercial vehicle users and CV fleets, whose business model and profitability has been severely impacted.   

The TCO – Total Cost Of Ownership – formula is being hit for a six. Already badly impacted by the 28-month Covid-induced downturn and just when business is beginning to see an uptick, owners of medium and heavy commercial vehicles (M&HCVs) or even small CVs will be compelled to rejig their business models. For instance, a 37-tonner Tata truck like the LPT 3718 has a 400-litre tank. In April 2020, a full tank of diesel would have cost the owner Rs 26,076 in Mumbai. Now, on October 9, the truck owner has to pay Rs 40,116 for the same quantity of diesel – Rs 14,040 more – each time the truck is tanked up.

Petrol also hits record high
Meanwhile petrol – diesel’s sibling – is also hitting record highs virtually every day. Today’s price hike of 29 paise a litre has taken the fuel to Rs 109.83 a litre, or just 17 paise shy of the Rs 110 a litre mark. In the first nine days of October 2021, petrol has become more expensive by Rs 1.88 a litre in Mumbai , by Rs 1.95 in Delhi, by Rs 1.69 in Chennai and by Rs 2.05 in Kolkata.

When will highly taxed diesel, petrol see cuts in India?
While there is little doubt that the daily fuel price increases are a result of soaring global crude oil prices – Brent crude is currently $82.68 a barrel – there is now a case for both the Central and state governments to serious consider reducing taxes on these two fuels.

Last month the GST Council did not take any decision to bring these fuels under its purview. This means that motorists will continue to pay wallet-busting prices to run their vehicles, unless they are using CNG (whose prices have also risen) or have made / making the shift to electric vehicles.

The current taxes – Central and State – typically account for around 55% of a petrol litre and 50% of a diesel litreIn FY2021, the Centre got Rs 334,894 crore excise duty from petrol and diesel. For both the Centre and financially fragile states, petrol and diesel account for a significant part of their revenue streams. While everyone is busy mopping up revenue during a difficult Covid period, it is the customer who is suffering silently.

There is also the case of the government – both Centre and States –aggressively driving the adoption of electric vehicles and electric mobility. While a number of states including Delhi, Maharashtra, Tamil Nadu, Telagana, Rajasthan, Assam and Kerala have introduced subsidy and incentive-laden EV policies, the government's recently announced PLI Scheme for India Auto Inc with an outlay of Rs 26,058 crore has given a huge fillip to the EV industry.

Unless the government steps in to reduce taxes, the hapless motorist tanking up on diesel and petrol will continue to pay wallet-busting prices. With energy prices and Brent crude on the upswing, there is little hope that fuel prices will not continue to rise daily.