With Deregulation, Diesel Prices linked to Market

Petrol-Price-HikeFor the first time in five years, common people in India have something to rejoice when it comes to diesel prices. The diesel prices came down by Rs 3.37 per litre (without VAT), a Diwali Gift by the Modi Government. However, future remains uncertain, as the diesel prices will now be linked to the market.

The Modi Government has deregulated the diesel prices. According to Finance Minister Arun Jaitley, “Price of diesel will be linked to the market, and therefore, depending on whatever is the cost involved, is the element that consumers will have to pay.”

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The UPA Government had deregulated the petrol prices in 2010, but had spared the diesel prices, as the oil companies were incurring huge losses. Later, the government decided to raise the diesel prices by 50 paise per month. Since January 2013, diesel rates have cumulatively risen by Rs. 11.81 a litre in 19 parts.

As the global crude prices fell to $84 per barrel – a fall of nearly 25% in the last six weeks, the oil companies recovered all losses and making a profit of above Rs 3.50 per litre. The government found it the right time to slash the prices and go for deregulation.

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