Fuel price hike continues to rise in the National Capital Delhi with diesel becoming more expensive than petrol for the first time in the history of independent India. Diesel prices stand at Rs 79.88 per litre (an increase of Rs 0.48) while the petrol prices remain the same at Rs 79.76 per litre. The rate hike was done on late Wednesday and the new rates will become effective from June 24, 2020 6 Am, according to a report published in Business Today quoting the Indian Oil Corporation. The increase in fuel prices over the last 18 days has been surprising to one and all with diesel prices hiked by Rs 10.48 a litre while petrol prices increased by Rs 8.50 per litre. The fuel prices hike won’t be stopping anytime soon considering the international fuel prices are rising.
Due to the contraction in the economy and the ongoing feud between Saudi Arabia & Russia, Benchmark Brent crude fell the lowest in 21 years to $9.12 per barrel on April 21. Now, it has increased to $43.08/barrel, still it’s the lowest since August 2016. Despite the plunging international oil prices, the difference between domestic fuel prices and International crude prices is the highest in almost 20 years. We can attribute the difference in the increase of taxes on the retailing of petroleum products.
As per the media reports, we can expect the other states to hike the fuel prices but the difference between petrol and diesel prices in India will narrow down significantly in the coming days. This is a surprise for the consumers considering diesel prices were cheaper than petrol by a wide margin in the days before COVID-19. In May 2020, the difference between petrol and diesel was around Rs 7.3/litre but everything changed due to the VAT hike by the Delhi government.
Centre and State follow differential taxation rule which always makes diesel cheaper in the country. AAP led Delhi Government increased the Value Added Tax (VAT) on diesel from 16.75 percent to 30 per cent and 27 percent to 30 percent on petrol. This lead to a big hike of Rs 7.10 on diesel and Rs 1.67 on petrol.
The diesel price hike would severely impact the transport sector which has raised the prospects of a strike. We have to wait and watch in regards to the future fuel hikes as the International fuel prices move upward.