What is the impact of Deregulation of Petrol on sale of Diesel Cars?

We all know that the government had deregulated petrol price in June 2010.

• This means the prices of the Petrol are now decided by the Oil Marketing Companies and not the Government.
• But for diesel, the prices are still regulated and the Government continues to keep diesel price artificially low by providing subsidy.
• You must note that it is only India and a few other countries where there is a large difference in prices of Diesel and Petrol. In some countries such as US, the price of Diesel is more than Petrol.

If diesel was deregulated:

  If diesel was to be deregulated now, its price would rise by Rs. 8.00 but still Diesel enjoys some tax sops apart from subsidy , so the impact would have been a lower in comparison to the Petrol prices.

Recently, it was reported in media that the growth in demand for petrol has dropped below diesel for the first time in 15 years as high cost of living is prompting more and more people to opt for diesel cars to take advantage of the Rs 26 a litre gap between the price of the two fuels. Due to subsidy, diesel consumption by private vehicles – “passenger cars and SUVs” — has exceeded consumption by the public transport and farm sectors. Clearly, consumers are ignoring the Rs 1-1.25 lakh premium on diesel cars since this is more than made up by the lower running cost.