On Wednesday, oil marketing companies raised diesel prices for the 18th straight day but kept petrol prices unchanged. In Delhi, diesel price has been increased by 48 paise on 24 June to Rs 79.88 per litre, making it costlier than petrol which remains priced at Rs 79.76 per litre.
Experts say that in the international market, diesel is slightly costlier than petrol due to higher cost of production. However, in India, tax on diesel have been kept lower than petrol since the fuel is primarily used by transporters and farmers. Besides Delhi, in other states, diesel continues to be cheaper than petrol but that gap is narrowing and this could possibly hurt the prices of farm products.
As for the national capital, historical data shows that the gap between prices of the fuels has vanished over the years. In June 2012, petrol price per litre in Delhi was Rs 71.16 a litre and diesel Rs 40.91, a difference of Rs 30.25. Now, after 8 years, diesel has become costlier than petrol.
This is largely due to an increase in both state and central government taxes.
On 4 May, amid falling revenues due to the coronavirus pandemic, Delhi government had increased VAT on both the fuels to 30 percent. For diesel, it was an increase from 16.75 percent earlier causing an increase of Rs 7.10 per litre, which is much higher than the impact on petrol that was imposed with a state VAT of 27 percent earlier, increasing its rate by Rs 1.67 a litre.
Additionally, the central government had increased the excise duty on per litre of petrol by Rs 10 and per litre of diesel by Rs 13.
Consequentially, around 70 percent of the retail price of fuel you pay now is just some form of tax.