Diesel Price in India
Diesel is one of the widely used fuel oils in India. Popular for its efficiency and mileage, the petroleum distillate is used to power motor vehicles and equipment installed with diesel engines or compression-ignition engines.
Just like its counterpart petrol, diesel powers many cars, buses, trucks, trains and other commercial equipment such as drilling machines, power generators and other pumping units.
Coming with a lesser price tag than petrol, diesel is one of the most preferred fuel across India. Transport sector is the prime consumer of diesel making it an essential commodity that could directly or indirectly affect the day-to-day life of every Indian citizen.
The price of diesel is hence an important component that people across the country would look out for. If you are one among those, below is an effort to keep you updated about the diesel prices in most major cities along with some information about what could possibly affect the prices.
We also try covering the most important updates about diesel and its prices to help you find anything and everything related to diesel under one roof.
Deregulation of Diesel Prices in India
In October 2014, diesel prices in India were deregulated, linking them directly to the international market rates. Prior to deregulation, diesel rates were regulated by the government.
The deregulation makes the diesel prices market determined without any government intervention. That means any fluctuation in the global crude oil prices will directly affect the retail diesel prices.
The deregulation helps the government to spend less on subsidies in an attempt to bridge the gap between global and domestic market prices.
It also promotes healthy competition among the oil companies, which will eventually benefit end users who can enjoy competitive prices and better service delivery.
Daily Revision of Diesel Prices or Dynamic Fuel Pricing
Following the diesel price deregulation was the introduction of daily revision of diesel prices or the dynamic fuel pricing model.
Came into effect on 16 June 2017, the dynamic fuel pricing model revises both petrol and diesel prices on a daily basis based on the previous day’s international crude oil price and currency conversion rates.
Prior to dynamic pricing, the revision used to happen fortnightly, i.e., on the 1st and 16th of every month based on the average international crude oil price in the preceding fortnight.
By adopting dynamic pricing India joined other developed countries like the US and Australia, where the pricing model is already in use.
The daily revised diesel prices will be updated by the fuel stations at 6 a.m. every day.
The move is to ensure that even the smallest benefit from the change in the international oil prices is passed to the dealers as well as to the end consumers on a daily basis. It will also bring transparency in fuel pricing and will minimise the impact on the dealers who often deal with fluctuating fuel prices.
How to Find Diesel Price Every Day?
With the daily revision of fuel prices in place, you may have to pay different price every time you fill your vehicle. While the prices in the automated fuel stations will be changed centrally, the non-automated pumps have to change them manually.
The non-automated fuel stations and consumers can access the updated daily price through various means such as –
- Mobile app – By downloading apps of state-owned oil manufacturing companies (OMCs), one can fetch daily updated prices of both diesel and petrol at all cities in India. Fuel@IOC is the mobile app of Indian Oil Corporation (IOC), SmartDrive is for Bharat Petroleum (BP), and for Hindustan Petroleum (HP) it is MYHPCL.
SMS service – Consumers can send a text message in a specific format with the dealer code to get the daily diesel price at specific fuel stations
- For IOC dealer diesel price, sms RSP< SPACE >dealer code to 9224992249
- For BP, RSP< SPACE > dealer code to 9223112222
- For HP, HPPRICEdealer code to 9222201122
The dealer code is usually displayed at the fuel stations, in the absence of which consumers can ask for the same at the station or get it from the respective OMC website.
- OMC’s Websites – Customers can also visit the official websites of respective OMCs to find the diesel price.
Various Components That Add up to Diesel Price in India
Though diesel is widely used across the country, very few customers actually know that the price of the diesel when purchased in crude form is less than half the price of what they typically pay at the fuel station?
Yes, when Indian oil manufacturing companies (OMCs) import crude oil (raw material for petrol/diesel) from other countries, they pay a nominal price per litre. Many a times it is less than Rs.25 per litre. Then what is adding up to make it thrice the original price.
Well, there are more than a couple of components that add up to the actual fuel price making it heavier on Indian pockets.
The components that contribute to the retail selling price of diesel include –
- Cost of crude oil + cost and freight (C&F) charges
- Refinery transfer price (RTP)
- Price charged to dealers
- Central and state taxes
- Dealer commission + other charges
- Cost of crude oil + cost and freight (C&F) charges
- Refinery Transfer Price (RTP)
- Price charged to dealers
- Central and state taxes
- Dealer Commission + other charges
India is the third largest oil consumer in the world. According to Petroleum Planning and Analysis Cell (PPAC), the country’s fuel consumption grew to 194.2 million tonne (Mt) in 2016-17. Of the total, diesel consumption accounts to 74.6Mt, making it the most consumed fuel.
Despite being one of the major oil consuming nations, India produces only 25% of its total crude oil requirements. As a result, the country has been increasingly depending on crude oil imports which meet nearly 76% of its requirement.
Most of the oil is imported from OPEC nations including Saudi Arabia, United Arab Emirates, Nigeria, Iraq, Iran, Kuwait, Angola, Malaysia, Indonesia, and off-late from the United States.
The journey of diesel, thus, begins with the purchase of crude oil from other countries which usually sell the oil in barrels for US dollars.
Indian OMCs pay the crude oil price plus the cost and freight charges to the foreign oil companies, which forms the base rate of the oil.
The purchased crude oil is then sent to the refineries for further processing to extract petrol and diesel. The OMCs pay a certain amount of fee to the refineries for every litre of petrol/diesel processed. The fee is called refinery transfer fee (RTP).
The OMC then sells the refined diesel to local dealers, which are usually fuel station owners, by adding some profit margin to the actual cost. From then the dealers become owners of the fuel.
The dealer then adds two different taxes - the Central Excise Duty levied by the Central Government and the Value Added Tax (VAT) imposed by the state government. While the excise duty remains fixed across India, VAT is something which varies from state to state. The variation in fuel price from state to state is mainly because of this component.
The final step is to add dealer’s commission and the air ambience charges to get the final retail selling price of diesel. The variation of diesel price from fuel station to station is mainly due to variation in dealer’s commission and other transportation charges involved.
Price Break up of Diesel
The data is as on 24 Sep 2017 in Delhi at IOCL retail pump outlet
|Components of Diesel Price Break-up||Unit|
|Cost & Freight (C&F) Price||$/bbl||68.92|
|Average Exchange Rate||Rs/$||64.09|
|Trade Parity Landed Cost Based on Daily Pricing Methodology (Price paid OMCs to refineries)||Rs/Lt||28.16|
|Marketing Cost, Margin, Freight and Other Charges||Rs/Lt||2.06|
|Price Charged to Dealers||Rs/Lt||30.22|
|VAT applicable for Delhi @ 16.75% + Rs. 0.25/Lt pollution cess||Rs/Lt||8.67|
|Retail Selling Price at Delhi||Rs/Lt||58.72|
Let’s put everything in numbers:
On 24 Sep 2017, price of diesel in the international market is $68.92 per barrel (one barrel=159 litres).
The average exchange rate on the day is Rs.64.09 per dollar, which brings the cost price of one litre diesel to Rs. 27.78. As per the daily pricing methodology, the OMCs pay Rs. 28.16 per litre to refineries.
After adding their profit margin, marketing cost, freight and other charges OMCs sell it to dealers for Rs. 30.22 per litre.
The fuel station dealers then add excise duty of Rs. 17.33 per litre, commission of Rs. 2.50 per litre, VAT and pollution cess of Rs. 8.67 per litre and sell it to the customers at Rs. 58.72.
|Also Know: Petrol Price In India|
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 (March-August 2017)
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 –
- Trend of Diesel Prices post Dynamic Fuel Pricing
- Trend of Diesel Prices before Dynamic Fuel Pricing (March to June)
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.
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 reduction in prices as the majority of fuel price is constituted of central and tax rates.
- Taxes constitute more than 40% of the diesel price
- 386% tax hike in three years
- Bringing diesel under GST – The impact
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.
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.
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.