Diesel becomes costlier than petrol in Delhi

DelhiUpdated: Jun 25, 2020, 07:18 AM IST

File photo Photograph:(ANI)

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Fuel rates differ from state to state depending on the incidence of VAT.

Diesel price for the first time in living memory crossing the rate of petrol in the national capital on Wednesday. Diesel now costs Rs 79.88 per litre in Delhi as compared to petrol price of Rs 79.76.So far, both the central and state government have made sure diesel costs less than petrol because it has greater commercial use.

However, diesel has become costlier than petrol in the national capital because the state government had raised local sales tax or VAT on the fuel sharply last month. 

Fuel rates differ from state to state depending on the incidence of VAT.

The Delhi government had increased VAT on petrol from 27 per cent to 30 per cent and that on diesel from 16.75 per cent to 30 per cent on May 5.

The lockdown halted commercial activity and the demand for fuel fell. Consequently, the government suffered losses. And hence, the Delhi government hiked the tax on diesel to boost revenue.

Another factor impacting fuel rates is the deregulation of fuel prices in India. 

In 2014, domestic diesel prices were linked to international benchmarks and since then fuel prices are updated every single day. However, the pandemic put a pause on that practice.

For 83 days, the daily price revisions were stopped. Over the last 18 days, the price of diesel has gone up by Rs 10.48 rupees per litre.

Global oil prices have slipped from 75 dollars per barrel to 40 dollars per barrel. But the government isn't passing on the benefits of lower global oil prices because the taxes have gone up exponentially.

Governments are in desperate need of funds and raising taxes on fuel is a quick way to plug the hole in public finances.