Diesel prices have been increased by 50 paise in India with effect from yesterday while petrol prices will continue to remain as they were. This is the first hike in diesel prices in four months now.
The reason for this increase is being laid out to be the rupee depreciation to the US Dollar. The value of Rupee vs. the Dollar has been falling sharply over the past month and is currently at the Rs. 65.5/USD level from 62/USD a few months ago. This has resulted in a steep increase in the import bill for India. Oil prices are fixed by oil firms every fortnight following the price deregulation and this leads to the market forces determining price. The price is largely dependent on the average cost of import and the rupee vs dollar exchange rate as exists.
Diesel is now set to cost Rs 44.95 per liter in Delhi. However, in Maharashtra, a surcharge of Rs.2 has been imposed by the State Government. This has been added to both diesel and petrol. Maharashtra is presently facing a huge problem of drought as well as unseasonal rain and this is being seen as one of the ways to raise funds to better the situation.
This comes at a time where there seems to be quite some movement in the economy with a rate cut being announced by the Central Bank as well. So on one hand there is good news for the Middle Class while on the other they will have to deal with the burden of inflated prices.