Soon, tanking up in Delhi to be cheaper than in UP
NEW DELHI: Petrol and diesel will become cheaper in Delhi than UP in a few days, restoring an advantage the capital’s motorists lost on October 5 when UP chief minister Yogi Adityanath matched the Centre’s move to offer relief from high oil prices by reducing tax on fuel while his Delhi counterpart Arvind Kejriwal did not budge.
The continuous decline in pump prices for the last one-and-a-half months has shrunk the difference between fuel prices in the two states by 67% for petrol and over 42% for diesel in the last 30 days alone.
Ajay Bansal of All India Petroleum Dealers’ Association, an umbrella body of petrol pump operators, said the current trend of price reductions by state run fuel retailing companies indicate price of petrol will fall by Rs 1.10 a litre and diesel by Rs 1.32 in the next six to seven days.
This is good news for the capital’s petrol pump operators who had seen sales drop, especially at outlets in areas bordering UP, as motorists preferred to tank up in the neighbouring state where fuel had become cheaper by Rs 3 a litre after the October tax relief.
The sharp price movement is because of the way the two states tax fuel. UP has a fixed rate, while Delhi has an ad-valorem system. In UP, the tax amount does not rise or fall when the retailers change the price. But since Delhi charges VAT as a certain per cent of the fuel price, VAT swings sharply with any price change.
The ad valorem system amplifies the impact of any price change. So it is good when price goes down but pinches harder than in a fixed rate regime when rates head north.
According to IndianOil, the country’s largest fuel retailer, petrol price has cumulatively declined by Rs 9.59 per litre and diesel by Rs 7.56 per litre in Delhi since October 17 as oil companies have passed on the benefit of sliding crude prices and stable rupeedollar exchange rate.
The Economic Times 02-12-18