Diesel prices in India has been increased by Rs.5 across India effective from midnight of 13th September. The diesel price hike was not expected as the government would have come under pressure as diesel is considered as the farmer's fuel. This is the first time in 15 months, diesel prices have increased.
Diesel car sales in India had increased significantly in the recent months primarily due to the price difference between petrol and diesel. Now the cabinet committee on political affairs' decision to increase diesel prices could hit the brakes on diesel car sales.
In another decision the committee has decided to reduce excise duty on petrol by Rs.5.5. The committee was planning to increase petrol prices by Rs.6 but it has compensated that by reducing the excise duty. Although there will not be any change in the price of petrol, the government's financial burden will be reduced.
Diesel prices will now range between Rs.45 and Rs.52 across the country. The increased diesel price might not have an immediate impact on car sales. With petrol prices still remaining quite high when compared to diesel, consumer sentiment toward diesel cars should remain positive.