Diesel Price In India

Overview Diesel Prices

Since July 2017, the diesel prices in India are revised every day after adapting to Dynamic Pricing Mechanism. Change in international crude oil prices directly reflect in the diesel prices of the day. If there is a reduction in the international prices, the benefit is directly transferred to the consumers.

Diesel is an important fuel that is widely used for various purposes. Used in trucks, trains, cars, buses, motor engines used for irrigation, drilling machines etc., the diesel is an important commodity and its prices will have a huge impact on the livelihood of the people. Being the second most populated country, the requirement will high for fuel such as petrol, diesel and gas.

Why are Diesel prices so high in India?

There are many reasons for the steady increase in the price of diesel in the country. One of the main reasons is the surge in the international crude oil. The OPEC (Organization of Petroleum Exporting Countries) controls the production of crude oil and therefore, commands the international crude oil market. In the recent past, there have been reductions in the supply of crude oil, leading to high demand and higher prices. Geo-political wars amongst the major countries in the world is also leading to higher fuel prices.

The rupee has been on a decline in the last few months. This makes our imports costlier. India is the 3^rd largest importer of crude oil in the world and for this reason, the cost of fuels like diesel become expensive as crude oil forms a major part of the base cost.

There are taxes and other charges levied on the fuels like diesel. This is charged by both the Central and State Governments. The VAT levied by the State Government varies from state to state. Hence, the price could vary for each state depending on the taxes. The cost of diesel shoots up tremendously with these tax elements.

The consumption of diesel is high in India due to preference in using diesel vehicles as well as economic activities. As demand increases for the fuel, so does the price. Also, in general, the processing cost of diesel as a fuel is higher than petrol. It has so happened that in some states, cost of diesel has overtaken the cost of petrol.

It is estimated that the consumption of diesel in India will touch 7.7 million tonnes by the end of 2018.

Components of diesel price

There are many components that add up to the diesel price. They are

Free-on-Board Price (FOB): This is the actual purchase price of diesel. It is paid by the oil marketing companies to purchase crude oil from overseas oil dealers.

Customs Duty: Duty imposed by the Government of India on the import of crude oil.

Import Parity Price: It is the total price of diesel paid at the port which includes import charges, customs duty, cost and freight price.

Refinery Transfer Price: This price is paid by oil marketing companies to the refineries for transferring diesel.

Inland Freight: This is the transportation cost borne by the oil marketing companies for transferring diesel from refineries to retail outlets.

Depot Price: Owners of retail outlets need to pay the oil marketing companies for purchasing diesel. This is called as Depot price.

Freight: The freight cost is calculated on the transportation of crude oil imported from crude oil dealers. The freight cost is added to the FOB charge. The combined price is called as cost and freight price.

Import Charges: This consists of insurance charges, port dues and ocean losses. In order to protect your money used in buying crude oil, the oil marketing companies pay premium to insurance providers. This amounts to insurance charges. The charges for availing port facilities is called as port charges.

Excise Duty: Central Government charges duty on the import of oil. Excise duty is charged uniformly throughout the country at Rs. 15.33 per litre.

VAT: The Value Added Tax is imposed by the State Government on diesel. This rate is different across states.

The Retail Selling Price of Diesel is the total of the above-mentioned points. Close to 40-45% of the Retail Selling Price is constituted by taxes and remaining by dealer commissions.

How frequently are diesel prices computed?

It has been a year since the Government of India changed the method of computation of fuel in the country. The Dynamic Fuel Pricing model is now followed by all oil marketing companies. Under this method, the fuel prices are calculated on a daily basis instead of the earlier fortnightly basis. There is much transparency and less manipulations in this type of computation.

The fuel prices are revised on a daily basis at 6am. It is calculated on the cost price of crude oil on the previous day. There are many ways you can track the new fuel price on a regular basis.

1) App

You can track the prices through the mobile applications like Fuel@IOC by IndianOil. The app lets you know a daily update on the revisions in all cities. It can be downloaded by visiting the Google Play store and Apple Store. BPCL also has a similar app called SmartDrive, while HP’s very own app is called MYHPCL.

2) SMS

Send a text - (Retail Sale Price) RSP< SPACE >DEALER CODE to 9224992249 (For Indian Oil). For Bharat Petroleum, the number is 9223112222. For Hindustan Petroleum, you can send an SMS HPPRICEDEALERCODE to 9222201122. Note: Petrol re-filling stations also display the dealer code of each petrol pump.

3) Website

You can access the daily diesel prices in India on the Indian Oil website using the RO locator. The website has prices listed as per the retail outlets of Indian Oil.

Benefits of dynamic fuel pricing

Many advanced countries in the world follow the method of dynamic fuel pricing to compute their fuel prices. It is believed that this type of calculation has many benefits. Any change in the international fuel prices can be immediately reflected on the domestic price of fuel. If the fuel prices come down, the advantage can be immediately passed onto the consumer. In the earlier case of fortnightly calculation, such advantages could not have been passed onto the consumer due to time taken.

Speculative factors are kept at bay whilst calculating fuel prices through this method. There is parity in the domestic prices of fuel.

The daily change in the fuel prices makes consumers more aligned to the market conditions. If there is a decrease in the price of crude oil, the benefit is passed onto the consumer the very next day. If the crude oil price increases, the hike benefits the oil marketing companies immediately.

GST and Diesel Prices in India

GST is not yet applicable on fuel and its products. There is a widespread consensus that current taxes are making fuel prices quite high in the country. Since 2014, there has been an increase in the excise duty. Though this was revised and brought down during the Budget 2018, there has been no reduction in the diesel price. This can also be due to the introduction of Rs. 8 per litre as road cess.

Through unofficial channels, it is estimated that fuel could be partially brought under GST. If this happens, it falls under the 28% slab and with the state added VAT, the diesel price could become more expensive. It seems that this calculation is followed in other parts of the world as well. There is a need for a strong political will and uniform policy creation by the Central and State Governments to make diesel price more affordable for the common man.

Ways to save diesel cost on your transport

Cashbacks on fuel cards

Most of the leading debit/credit cards offer cashbacks up to 5% at all fuel stations. You can also get fuel surcharge waivers. This has spiralled upwards after demonetization as non-cash payments have taken a leap ahead. Some banks offer personalized credit cards called as fuel cards with the sole objective of saving money on fuel spends every time you swipe that card.

There are many co-branded fuel credit cards in the market now. Benefits like reward points, cashbacks, discount or a combination of all is available on these credit cards. Some of the fuel cards available in the market are BPCL SBI Credit card, ICICI Bank HPCL Credit card and HDFC All Miles Credit card.

Other ways to save diesel cost

While the cost of diesel is almost touching the sky, there are other activities you can undertake to curb the rising diesel expenditure:

Servicing your car regularly:Regular servicing of your vehicle ensures that the engine is efficient and thereby reduces fuel consumption.

Combining trips:You can either opt for carpool, shared rides in cabs or simply walk it up for short distances.

Electric cars:There has been deep interest in the option of electric cards in the country. While it is not quite visible on the roads today, a Bangalore-based Electric Vehicle company estimates that there will be 10,000 electric cars and buses on the roads of our country in the next five years.

Car Pooling:You can save quite a bit on your diesel expenses by opting or creating car-pooling. This allows for sharing fuel expenses on a monthly basis and keeps less vehicles on the roads. This helps in reducing pollution too.

Cycle to work:Many private organisations are trying to promote the cycle-to-work concept. This is quite a trendy idea and has direct impact on your diesel expenses. It reduces your dependency on vehicles for commuting, decreases pollution and also has direct benefits on your health.

Ridesharing:Most of cabs operating in India like OLA and Uber have share cab options. This is an on-demand service and can be booked instantaneously through iOS or Android app. This service allows commuters in same direction to share a ride.

FAQs

1. How can I track the cost of diesel on a daily basis?

It is quite easily possible with the help of mobile apps like Fuel@IOC or by visiting the websites of oil marketing companies.

2. Why do we follow the Dynamic Fuel Pricing method?

This method of fuel price computation is very transparent as the diesel prices are directly linked with the crude oil prices in the international market. Also, in this method, very less manipulation can be done on the fuel prices.

3. What is the impact of GST on diesel price?

As of now, there is no direct impact of GST on diesel price as it doesn’t come under the gamut of GST.

4. What is VAT?

VAT is Value Added Tax, a consumption tax charged on a product whenever value is added at each stage of the supply chain.