Today's Diesel Price in Karnataka

While agriculture is the primary occupation in the state, the state also hosts some of the largest public sector industries in India. Of-late it has emerged as the pan-Indian leader in Information Technology (IT) with more than 2,000 firms located in the major cities of the state.

People from different ethnic groups from across the country live in the state. The population of the state is rising steadily with more and more people moving to the state.

With the increasing number of people is the increasing number of private vehicles plying on the state roads. According to the Karnataka state transport government, the number of public transport vehicles in the state are decreasing while the number of private vehicles is increasing at an alarming rate.

Cars form major part of private vehicles compared to two wheelers as the number of new car registrations are increasing every year.

In an effort to decrease the dependency on fossil fuels and to reduce pollution levels, Karnataka became the first Indian state to roll out Electric Vehicle and Energy Storage Policy, in line with the Indian government's vision to make the country an all-electric vehicle market by 2031.

With the state's vehicular traffic primarily composed of private vehicles such as cars and public vehicles like buses which rely on diesel, the demand for the fuel is high in the state. However, due to less amount of tax levied by the Karnataka on diesel, the diesel price in the state is less compared to other states, which charge a bit higher tax.

Factors Affecting Diesel Rate in Karnataka

Just like in other Indian states, diesel rate in Karnataka is affected by various factors which are part of diesel pricing.

Diesel pricing includes not just the product price but a few other elements including the state and central government taxes, transportation and freight charges, dealer's and oil company's commission and other charges like surcharge and cess.

Of all the components, major factors that affect the diesel price in Karnataka or in any other Indian state are the international crude oil price, US dollar to rupee exchange rate, and state and central government taxes.

India imports most of its fuel requirements from other countries as the existing resources in the country are not sufficient to cater the increasing demand for diesel.

Hence, the journey of diesel begins with the oil marketing companies such as Indian oil, Hindustan Petroleum and Bharat Petroleum, purchasing crude oil from the international oil companies.

As the rate of the crude oil is most likely to change on a daily basis, every slight change in the crude oil price in global markets would impact the selling price of diesel in India.

Secondly, as oil trading typically happens in US dollars the change in dollar to rupee exchange rate also impacts the price of diesel.

The third component is the tax levied on diesel. To everyone's surprise, taxes levied on diesel constitute more than 50% of its price. Which means if you are paying Rs. 60/Lt of diesel, you must be paying more than Rs. 30 to the respective state and central governments as taxes.

On a daily basis, however, the state and central taxes remain the same. Any hike or reduction in tax rates would directly impact diesel price. For instance, if Karnataka government cuts the value added tax on diesel, the price of diesel in Karnataka will come down and vice versa.

Other factors that could marginally impact diesel price in the state are dealer's commission and freight charges involved in transporting the fuel to the fuel stations.

Diesel Price in Karnataka Compared to Other States

Compared to other south Indian states such as Andhra Pradesh, Telangana, Kerala and Tamilnadu, the state of Karnataka offers diesel at the lowest price considering the rates in the state's capital city, Bengaluru.

The less diesel price in Karnataka is attributed to the low value added tax (VAT) charged by the state government compared to the tax charged by rest of the south Indian states governments.

State Taxes and Diesel Price in Karnataka

As discussed earlier, state taxes form a major part of the diesel price in Karnataka. Even though that state charges less tax compared to other south Indian states, VAT is one component that significantly affects diesel price in the state.

As of 5 October 2017, the Karnataka state government levies 19% VAT on diesel compared to 30.82%, the highest tax, levied in Andhra Pradesh.

Earlier, the government used to charge entry tax of 5% on diesel, which was abolished in July 2017. With that diesel price in Karnataka has come down, compared to other south Indian states, some of which still charge entry tax.

How Often Diesel Prices are Revised in Karnataka?

Diesel prices in Karnataka, just like in any other Indian state, are revised on a daily basis since the dynamic fuel pricing has been introduced in India in June 2017.

Dynamic fuel pricing or daily revision of fuel prices is to ensure the retail selling price of diesel in India is in sync with the global crude oil prices. As the global crude oil prices fluctuate on a daily basis, even the slightest drop in the oil price would reach the end customer through dynamic fuel pricing. Further, it will bringing transparency in diesel pricing in India.

Prior to dynamic pricing, the diesel prices in Karnataka, similar to all other states, were revised fortnightly based on the average price of the previous 15 days.

As per the new dynamic pricing model, all the petrol pumps in Karnataka will update the revised diesel price every day by 6 a.m. and will display the same at the fuel stations.

Petrol pumps in Karnataka include both automated and non-automated fuel stations. While the automated stations which are centrally controlled will get an automatic update of diesel prices, the non-automated stations will do it manually.

The oil marketing companies including Indian Oil, HP and BP have made the revised diesel prices available on their respective websites.

Consumers can also download the mobile apps of the oil companies to know the daily revised diesel price in their cities. For petrol pump specific rates, they may have to send an SMS with the dealer code, which is available at the pump, to the company provided numbers.

Effect of GST on Karnataka Diesel Price

GST or goods and services tax came into effect on 1 July 2017 in India. The new tax regime, which is deemed as a major reform in the country's financial sector, abolished a variety of taxes levied by state as well as central governments on most of the products and services.

The prices of many goods and services got affected with the implementation of GST both positively and negatively. However, GST has a zero effect on diesel and other petroleum products, as they are currently kept outside the purview of the tax. In other words, diesel is exempted from GST and is being taxed as per the old norms.

The central and the Karnataka state government still collect the taxes on diesel individually. Therefore, as of now there is zero effect of GST on the diesel price in Karnataka.

If diesel is brought under GST, its price may either go up or come down based on the tax bracket it belongs to. Currently, the tax slabs under GST are 5%, 12%, 18% and 28%. The diesel price in Karnataka will come down only when diesel is brought under a tax slab which is lesser than the current taxes (state + central) levied on the commodity.

Diesel Rate versus Petrol Rate in Karnataka

Diesel price in Karnataka, just like in other Indian states, is lesser than petrol. The primary reason for the price difference is the variance in the taxes charged on each of the commodities.

For instance, central government levies an excise duty of Rs. 15.33 on a litre of diesel, whereas it collects Rs. 19.48/Lt on petrol. Similarly, VAT levied on diesel in Karnataka in 19%, while it is 30% on petrol. The difference in the tax rates converts into price difference between diesel and petrol.

The average price difference between diesel and petrol in Karnataka in Rs. 12-13 per litre.