The ongoing Covid-19 pandemic has had a serious impact on the global economy and has brought a considerable part of the industry, worldwide, to a standstill. Long unprecedented lockdowns worldwide, to control the spread of corona virus, have affected many individuals and businesses which led to a fall in consumption of commodities to a level never seen before. Shutdown of travel and commercial activities during the lockdowns resulted in reduction of oil import and diesel consumption in India. The reduced consumption of commodities has, in turn, affected the government’s tax revenue. Despite the biggest drop in crude oil price in global market since 1991, the retail price of diesel in India has touched a new high-level record. It was because, in order to overcome the debilitating effects on both the central and state finances, the Indian government has doubled the taxes on diesel. Across the world, diesel is commonly used by various sectors as a means of transporting and electricity generating fuel. It is essentially a price-determining commodity. Therefore, any change in its price may affect the economy to the micro-level, including nation’s Gross Domestic Product (GDP). This study aims to assess the significant effects of the pandemic situation of Covid-19 on diesel in the Indian context.

Diesel is a price determinant among various other commodities, because it is being used extensively in the construction projects, and rise or fall in its price will directly have an impact on the price of various commodities and overall cost of a construction project. In the Indian construction industry, in most of the contracts barring few, the variation in the project cost due to inflating diesel price is being calculated using WPI. CIDC has taken an initiative to develop construction-specific cost indices (CCI) but it is not being commonly used by the industry. Empirically, it has been observed that the cost of escalation, in the price of diesel, obtained from the present method is too low then the actual cost escalation incurred in the construction projects. For this reason, the focus of this study is on WPI and CCI with un-predictable inflation in the price of Diesel in India.