Diesel Price in India today

Before June 15, 2017, diesel prices were revised once every two weeks. Post the aforementioned date, diesel costs have been subjected to changes every single day. The daily revision is a brilliant move for several reasons. The primary and the most important reason for the differences in diesel price in India is that we are in a position to actively understand the alterations regularly. When the diesel rate in India was revised once every two weeks, the price difference was significantly higher, which made it very difficult for the consumer.

Key factors affecting the diesel price in India

The oil marketing companies of our country introduced the daily price revision a few years ago which made the price of diesel vary across India. The following are the leading factors for the change of:

Cost of Crude Oil

Crude oil’s cost is one of the major deciding factors of diesel prices across the globe. The worldwide demand and supply, along with the economic conditions of crude oil determines the price of diesel in India. Low rates of production, coupled with the increase in demand at an international level affect the price of diesel. Furthermore, political unrest in the crude oil-producing countries of the world affects diesel prices as well.

Demand and Supply of Diesel

The majority of the vehicles in our country depend upon petrol. If the constant supply of petrol declines as a result of issues with refineries or delayed imports, the inventory of diesel may steadily decline. If the transportation of diesel from one place to another does not happen regularly or it simply cannot support the flow of supplies, then the prices of diesel would skyrocket. This directly affects today diesel prices in India, which is majorly dependent on the export of diesel from foreign countries.

Tax Rates

The rate of tax on diesel solely depends on the government and its policies on imposing taxes on the different fuels. As the government of India raises the tax on fuels, the oil companies will in turn increase the diesel rate in India to cut its losses as well as to maintain the marginal profits in the oil business.

Rupee

The rupee to the dollar exchange rate is also a crucial factor that highly influences the price of diesel in the country. Indian oil companies pay to the countries it imports the oil from in dollars. However, they incur expenses in terms of the rupee. When the rupee’s value is good against the dollar, and the price of the crude oil declines, then the oil companies gain profits.

Logistics

Apart from the above-mentioned factors, logistics is one of the key factors that affect today diesel prices in India. Diesel that has to be transported to longer distances to cities, or regions that is geographically further from the oil depots will be more expensive than the places that are nearer to the reservoirs of the oil companies. The difference in prices might be drastically different in cities that are far from each other. For instance, the diesel price in Jaipur was ₹100.36 per Litre on September 30, 2021. And in Chennai, the same diesel’s price was ₹94.63 per Litre.

The highest diesel price in India today is in Srikakulam at ₹98.22. And the cheapest diesel price in India is in Nicobar Islands at ₹78.05.

About Diesel

Diesel is a form of fuel that is used to run vehicles such as cars, barges, buses, boats and so on. It is also used to power machines such as construction and farm equipment. Usually, diesel fuel is a mixture of hydrocarbons. The boiling points of diesel are in the range between 150 to 380 degrees Celsius.

The three major classes in petroleum crude oil are of the following:

• Naphthenic (cyclo paraffinic)
• Paraffinic
• Aromatic Hydrocarbons

Olefins or unsaturated hydrocarbons rarely occur in crude oil. In modern chemistry, paraffinic and naphthenic are known by the name alkanes and cycloalkanes depending on the respective groups of hydrocarbons. The refinement of crude oil starts with the heating up of the viscous liquid at more than 400 degrees Celsius. This process will lead to the liquid being converted into a vapour state. This vapour will ultimately cool down and enter the fractional distillation tower. As this vapour rises to a higher altitude, it begins to cool down. The vapour will then reach a certain temperature point which makes the hydrocarbon chains return to a liquid state. At different levels in this tower, the distillation plates will begin to hold the liquids as it emerges. The longest hydrocarbon chain has a boiling point of more than 400 degrees Celsius. And as soon as the chain enters the distillation tower, it gets converted into a liquid state again. Ultimately, this emerges as bitumen and it exits at the lower end of the distillation tower. As the vapour rises, the shorter hydrocarbon chains start to get converted into liquid. The fuel oil will emerge as the vapour cools down below 370 degrees Celsius. This process continues until the entire upper portion of the tower with various distillates emerges as the vapour cools down further. And when the vapours in the distillation tower reach between 200 - 350 degrees Celsius, the diesel fuel begins to emerge. The vapour collects on the distillation plates where it will finally be siphoned off into a diesel holding tank.

How are diesel prices calculated in India?

It's no secret that taxes make up for more than 50% of the retail price of both diesel and petrol. Public sector Oil Marketing Companies (OMCs) are in charge of revising the cost of diesel in India daily, depending on the price of global crude oil. The base price set by the OMCs and freight price is included in the price charged to the dealers. As of late-2021, the price charged to the dealers include about 49% of the retail price of diesel, the rest being the various taxes levied by the state and central governments.

Where the central government levies taxes on the production of petroleum products, the state government taxes on the sale. This makes up for around 34% of tax on the current retail price of diesel, as of late-2021. While the excise duty price is uniform across the country, states levy sales tax/ Value Added Tax (VAT), which, in turn, is variable across different states. In addition to the tax rates mentioned above, some states also levy certain additional levies such as cess, like, for instance, in the case of many state governments such as Tamil Nadu, where the cess alone, as of late-2021, is Rs. 11.5 per Litre.