A fuel gun sits docked at a petrol pump in India. (Photographer: Daniel Acker/Bloomberg)

Diesel Price Hiked Again; Wipes Out Rs 2.5-Per-Litre Cut

Diesel price rose for the tenth consecutive day today to wipe out all of the Rs 2.50 a litre cut in rates announced earlier this month through excise duty cut and oil company subsidy.

The government had, with effect from Oct. 5, cut excise duty on petrol and diesel by Rs 1.50 a litre and asked state-owned oil firms to subsidise the fuel by another Re 1 a litre.

The retail selling price, however, continued to rise on subsequent days.

While petrol price remained static, diesel rates were hiked by 8 paise a litre, according to a price notification of state-owned fuel retailers today. With this, diesel prices have in the last 10 days been hiked by Rs 2.51 a litre.

This is the fastest increase in rates since oil firms implemented daily price revision in mid-June last year.

Diesel now costs Rs 75.46 a litre in Delhi, a shade higher than Rs 75.45 a litre price when the government on Oct. 4 announced the excise duty cut. Petrol costs Rs 82.72 a litre and has witnessed an increase of Rs 1.22 a litre since the Oct. 4 decision. Petrol on Oct. 4 was priced at Rs 84 a litre.

While in Delhi diesel rates are at their highest ever, in most the other states it is lower than the peak as some state governments matched the central government’s move to lower excise duty and oil company subsidy by a similar cut in local sales tax or value added tax.

Diesel in Mumbai costs Rs 79.11 a litre, down from Rs 80.10 on Oct. 4. Petrol, too, in Mumbai is down from the peak Rs 91.34 a litre on Oct. 4 to Rs 88.18 today.

After the central government lowered fuel prices, Maharashtra and Gujarat were among the first states to announce a matching Rs 2.50 cut. Chhattisgarh, Jharkhand, Tripura, Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Haryana Assam, Uttarakhand, Goa, Arunachal Pradesh and Bihar followed suit. Jammu and Kashmir, which is under governor's rule, too reduced tax on the two fuel.

Maharashtra, however, reduced VAT only on petrol and not on diesel.

Even before the excise duty cut, Rajasthan, West Bengal, Karnataka, Kerala and Andhra Pradesh had last month reduced VAT to cushion consumers for a spate of price increases.

The reduction in excise duty, only the second in four years of BJP-led NDA rule, will dent central government’s revenues by Rs 10,500 crore and was aimed at cooling retail prices that had shot up to an all-time high.

The BJP-government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.