Petrol prices in India have seen numerous revisions (mostly upwards in past one year) but the Diesel fuel prices have remained still since 25 June 2012 in India so far as we write this article. Now the Presidential elections in India being just a few days away, the prices of Diesel are expected to be revised once the elections are over. The under-recoveries by state run oil companies in India is close to Rs. 10 per litre in India, but since Diesel is much vastly used fuel in transport of good, in industrial and agricultural applications that it has far greater implications on inflation and political situation in India when compared to the petrol price hikes. Since the Diesel fuel is heavily subsidized, the taxes are also quite low on Diesel when compared to taxes on petrol.
There have been various proposals by oil ministry to recover some of these losses by adding additional taxes on Diesel cars in India which seems unlikely as the heavy industry ministry and automobile industry associations are not in favour of it, a hike in the prices of Diesel seems inevitable.
Since diesel price is politically and economically much more sensitive matter compared to petrol prices, a steep hike is unlikely however, Government may decide to hike the price between Rs. 2 to Rs. 5 per liter and repeat this hike at certain interval spread over an year so as to not give a shock price hike as it was given in the hike of petrol prices on 24th May 2012.
The recoveries from the price hike in Diesel by Rs. 1 per litre approximately translated to Rs. 65,000 crore in an year as per the current consumption patterns. The prices of Diesel in India, unlike the petrol prices are still controlled by Government of India directly and this gives government a tool to control the food and other inflation levels by keeping a check on the prices of the most consumed fuel in India. We are keeping a close eye on the updates and will keep you posted on the latest developments. Stay tuned to Car Blog India for all the latest automobile news.