Today's Diesel Price in Tamil Nadu

In that regards, let us see a few more details about the diesel price in Tamil Nadu compared to other south Indian states, factors affect the price, how often diesel prices are revised and other information about diesel and its pricing that would give a few insights about the topic.

Diesel Price in Tamil Nadu Compared to other South Indian States

Diesel price in Tamil Nadu compared to other south Indian states such as Andhra Pradesh, Telangana, Karnataka, and Kerala is the second lowest with a litre of diesel trading at Rs.60.02/Lt on 13 October 2017. The lowest price in offered in Karnataka, which abolished entry tax on diesel leading to reduced fuel prices in the state.

The second lowest diesel rate in Tamil Nadu can be attributed to tax rate charged by the state government which compared to other south Indian states is again the second lowest.

Factors Affecting Diesel Price in Tamil Nadu

Tamil Nadu, similar to other Indian states, levies value added tax (VAT) on every litre of diesel sold in the state. The rate of tax is what makes diesel price in Tamil Nadu different from other states. Therefore, tax becomes the primary factor that affects diesel price in the state. Any revision, either upward or downward, would directly impact the price of diesel across all the cities and towns in Tamil Nadu.

Besides the state specific tax, other factors that commonly affect diesel price in Tamil Nadu and in other Indian states are

1. International crude oil prices
2. Currency exchange rate
3. Central government taxes
4. Profit margins and dealer commissions

The two factors that impact diesel price on a daily basis are the global crude oil prices and the currency exchange rate.

1. Crude Oil Prices: Ever since dynamic fuel pricing was implemented in India, diesel prices in India are aligned with the international crude prices on a daily basis.

Crude oil prices are typically volatile in nature as they are determined based on various other factors such as the demand and supply metrics, political stability in the oil producing nations, climatic conditions, and similar other factors. The recent hurricane in the United States is one such example which damaged many oil refineries across the country resulting in reduced oil production. Less supply led to higher demand thus higher oil prices.

India being major importer of crude oil purchases more than 70% of its oil requirements from other countries. Daily diesel price will be calculated based on the rate at which international crude oil is being traded on that particular day. Hence, any slight change in the global crude price would impact the retail selling price of diesel in India.

1. Currency Exchange Rate: The second element that affects the diesel on a daily basis is the US dollar to Indian rupee exchange rate. Globally oil trading happens in US dollars. Whenever the dollar value strengthens, oil companies have to shell out more money to purchase oil, hence the fluctuating dollar price becomes another factor that affects diesel price.

1. Central Taxes: Just like the state governments, the central government also earns significant revenue on diesel by collecting excise duty on every litre of diesel sold in the country. Though the excise duty does not change on a daily basis, any revision in the tax would affect the diesel price across the country. Recently, there was a reduction in the excise duty on diesel by Rs. 2/Lt, effective from 4th October, which brought down diesel rate across the country.

1. Profit Margins and Dealer's Commission: Who would do a business without profits and so are the Indian oil companies and petrol pump dealers. The downstream oil market in India, which includes refining, processing and purifying of crude oil, along with the marketing and distribution of end products, is dominated by state-owned oil companies such as Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum, which captured more than 90% market share. Private players such as Reliance, Essar, Shell and others occupy the remaining market share.

These companies add marketing and distribution costs as well as their profit margins to the diesel price before selling it to the petrol pump dealers. They would revise the margins whenever necessary. Though not often, any change in the margins will also impact diesel price.

Once the petrol pump dealers purchase diesel from the oil companies, they add their commission, which factors in employee minimum wage, to every litre of petrol sold at their station. The oil companies usually decide the dealer's commission and would revise the same once every year. The revision of commission also impacts the diesel price.

State Taxes and Diesel Price in Tamil Nadu

The Tamil Nadu government currently levies value added tax (VAT) of 25% on a litre of diesel, which compared to other south Indian states in the second lowest with the lowest levied by Karnataka government.

The latest tax revision in the state took place in March 2017, when the government increased the tax from 21.4% to the current 25%. VAT on petrol was increased from 27% to 34%. With the revised tax rate, diesel in the state became costlier by Rs.1.70/Lt and petrol by Rs.3.78/Lt in the same month.

How often Diesel Prices are Revised in Tamil Nadu

In Tamil Nadu, just like in other states in India, diesel prices are revised on a daily basis. Ever since dynamic fuel pricing was introduced in India, diesel prices have been linked to the global crude oil prices.

Just like gold prices, petrol and diesel prices in India are now revised every day based on the international crude oil price and currency exchange rate. This enables the oil companies to pass even the slightest change in the product price and exchange rate fluctuation immediately to the end user.

Customers are expected to benefit from this model of pricing as the daily fluctuation remains within manageable units of currency unlike the previous fortnightly revision wherein the price adjustment was often high.

The new pricing mechanism also brings transparency in fuel pricing as well as encourages automation of petrol pumps while enabling better stock management practices at the stations.

All the petrol pumps in Tamil Nadu, as per the new policy, should update the revised diesel price everyday by 6 a.m. The updation will be done automatically at the automated stations, while the rest have to do it manually by fetching the revised prices from the respective OMCs.

Customers can find the daily revised price of both diesel and petrol on the websites of the oil companies.

Effect of GST on Tamil Nadu Diesel Price

Goods and services tax or GST has been introduced in India in July 2017 to bring uniformity in tax rates across the country. Post implementation of GST, the rates of many goods and services got affected due to the revised tax rates.

The price of diesel and petrol, however, remained unaffected as the fuel products are currently exempted from the new tax regime. Diesel and other petroleum products are still being taxed as per the old tax regime, which includes both state and central government taxes. While the central tax remains constant across the states, the state-level tax on diesel varies from state to state. The respective states still have the right to decide the percentage of tax to be levied on the petroleum products.

Hence, the effect of GST on diesel price in Tamil Nadu and in other Indian states is nil for now. If diesel is brought under GST, its price will get affected based on the new tax rate. If the new tax is less than what is being charged now, the rate of diesel in Tamil Nadu will certainly come down.

Diesel Costs versus Petrol Costs in Tamil Nadu

The average price difference between petrol and diesel in Tamil Nadu is about Rs 10-11/Lt. The difference in price is mainly due to the difference in the VAT being levied on both the commodities.

Currently, the central excise duty on diesel is Rs. 15.33/Lt, whereas on petrol it is Rs. 19.48/Lt. Similarly, the VAT charged by Tamil Nadu government on diesel is 25%, while it is 34% on petrol.

*Disclaimer: BankBazaar makes no guarantee or warranty on the accuracy of the data provided on this page, the prevailing prices are susceptible to change and provided on an as-is basis. We accept no liability for any loss arising from the use of the data contained on this website.