Diesel Price in India Today

Find the current diesel price in India and factors affecting Price of diesel in India. The below diesel price trend in India offers insights such as the highest and lowest diesel prices recorded during a month.

Factors Affecting Diesel Prices in India

Major factors that affect diesel price include - international crude oil price, exchange rate and taxes.

• International crude oil price: The primary factor that affects the diesel price is the crude oil price in the international market. The crude oil prices are typically determined by various factors including worldwide demand and supply, global economic conditions, seasonal and climatic changes, political instability in oil producing countries. Let's look at them in detail -

• Increased demand: The same demand and supply phenomenon applies even for the diesel price. The higher the demand when the supply is short, the higher the price of diesel. Similarly, high supply and less demand will lead to reduction in prices.

• Seasonal and climatic changes: Whenever there is a change in season, oil refineries tend to conduct maintenance activities which may partially affect the production activities leading to lesser supply and higher price.

Severe weather changes or natural calamities such as cyclones and hurricanes may also affect both drilling and production activities leading to oil shortage. Sometimes transportation facilities are also affected resulting in less refined gasoline.

• Devaluation of US dollar: As crude oil is traded in US dollars and the dollar being the most stable currency, directly affects the global oil prices. Whenever dollar gains strength, there would be a drop in the value of oil and other dollar denominated commodities and vice versa.

• Political instability: Any geo-political tension that affects the oil production throughout the world or in the oil producing countries will show direct impact on the fuel prices. The recent tensions between the US and North Korea has significant impact on the dollar which in turn resulted in fluctuating fuel prices.

• Exchange rate: The crude oil is typically bought in US dollar, therefore, any change in India's exchange rate and the US dollar will affect the buying cost of crude oil hence would impact the selling price in India.

• Central and state taxes: Whenever there is a change in state and central tax on fuels it would be reflected in the retail selling price of diesel. As different states have different VAT rate, the rate of diesel varies from state to state.

Trend of Diesel Price in India for past Six Months

As mentioned earlier, diesel price revision which used to happen fortnightly is now happening on a daily basis. As discussing about every day price only makes it lengthy, let us see the trend of diesel prices before and after dynamic fuel pricing is in place -

1. Trend of Diesel Prices post Dynamic Fuel Pricing

Aimed to bring more transparency in fuel pricing and to benefit end consumer with even the slightest change in the oil price, the dynamic fuel pricing is still a matter of controversy.

Soon after the daily price revision system was introduced from mid-June, there was an immediate decline in diesel price. From Rs. 54.49 per litre on 16 June it continued to drop for 15 continuous days till it reached Rs. 53.33 on 1 July in Delhi. Since then, the price of diesel has been on rise, with the OMCs increasing it in small doses every day, except a few smaller cuts here and there. The price of diesel has risen by Rs. 5.39 per litre to Rs. 58.72 as of 24 September.

The increasing crude oil price is one major factor that contributed to the diesel price hike during the period. The price of one barrel of crude oil has seen an 18% increase from $58.06 on 01 July to $68.92 on 24 September. Hence the corresponding diesel price increase of over 10.10% in Indian market.

2. Trend of Diesel Prices before Dynamic Fuel Pricing (March to June)

The last revision during the fortnight pricing happened on 15 June, when the price of diesel was cut by Rs. 1.24 per litre making it Rs. 54.49 per litre in Delhi.

On 1 June, the price of diesel was increased by Rs. 0.89 per litre to Rs. 55.94.

The month of May has seen two revisions including a marginal 44 paisa hike per litre of diesel on 1 May to Rs. 57.35 followed by a rate cut of Rs. 2.10/litre on 15 May.

On 16 April, diesel was at Rs. 55.61 per litre, Rs 1.04 increase from the previous revision and the revision towards the month end increased its price further by Rs. 2.94.

In the month of March, the price of diesel was cut by Rs 2.91 per litre bringing its cost to Rs. 55.61.

The change in the prices were majorly attributed to the global crude oil prices and the exchange rate.

GST and Diesel Price

There has been an ongoing discussion on bringing the fuel prices under the goods and services tax (GST), which subdues all indirect taxes levied by the state and central governments.

Some experts opine that bringing them under the new tax regime would lead to a reduction in prices as the majority of fuel price is constituted of central and tax rates.

1. Taxes constitute more than 40% of the diesel price

As on 24 September 2017, diesel costs Rs. 58.72 per litre, of which Rs 26 goes to central and state government in form of excise duty and VAT. Which means taxes constitute 40% of the selling price of diesel making them another deciding factor after global crude oil price.

2. 386% tax hike in three years

Between July 2014 and January 2016, the price of the crude oil in the international market slashed more than 70% from $106 per barrel to $26. With India importing more than 70% of its petroleum requirements, any change in the global crude oil prices should bring change to the selling price of diesel.

Despite 70% change in the global prices, the selling price of the diesel remained almost unaffected due to the incumbent government's tax hike in a move to meet its revenue and fiscal deficit targets.

On 1 April 2014, the central excise duty on diesel was Rs 3.56 per litre, which in three years was increased by a whopping 386% to Rs. 17.33 per litre (as of 25 September 2017). Further, the state governments also revised VAT on diesel at various occasions.

The combined effect of central and state government taxes led to the continuous increase in diesel prices even when the crude oil has become cheaper by little less than half.

3. Bringing diesel under GST - The impact

Petroleum products such as petrol, diesel, jet fuel and natural gas have been kept outside the purview of GST. If they are brought under GST, the prices may become substantially cheaper.

Currently, GST is applied in four tax brackets - 5%, 12%, 18% and 28%. Even after taxing petrol/diesel under the highest tax bracket that is 28%, the prices would come down at least by 22%. However, in a few cities where taxes are little lesser, the prices may go up.

*Disclaimer: BankBazaar makes no guarantee or warranty on the accuracy of the data provided on this page, the prevailing prices are susceptible to change and provided on an as-is basis. We accept no liability for any loss arising from the use of the data contained on this website.