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Why Fuel Prices are High in India. Petrol and Diesel Price Hike Reasons

Why Fuel Prices are High in India. Petrol and Diesel Price Hike Reasons

Petrol and Diesel Prices are on its High in India. Top 4 Reasons demystified for High Fuel Prices in India due to Excise, VAT, Refinery Margins, Dealer Commission impacting Indian Consumer


 

Reason for High Fuel Prices - Petrol & Diesel Prices

Petrol has breached in Rs 70 per Litre mark in Delhi and almost touching in Rs 80 per Litre in Mumbai. For People of Mumbai - Petrol Prices surpassing all previous highs

Diesel Price in Delhi is at Rs 58.6 per Litre, while in all other 3 Metro Cities - Mumbai, Chennai, Kolkata is above Rs 60 per Litre.

Despite of Developments

» Rupee Gaining Stronger against Dollar at its 2 year highs of Rs 63.9 against Dollar - down from its peak of Rs 69/$

» Crude Oil also at sub 50$ per Barrel - which is what Historical average, down from its peak of 147$/barrel

Wondering why are Fuel Prices so high in India - where in Petrol Prices are inching to mark new record of highs in Maharashtra and also are relatively very high in Other Cities - despite Crude Oil at a much lower level.

So much so - that Government has stopped 15 days Fortnight Price revision and now Fuel Prices are revised daily since 3rd July with Petrol Prices have silently been increased day by day and is near its peak highs in many Cities.

Wondering - what is are the Reasons for High Fuel Prices in India

1. Higher Excise Duty: Excise Duty on Petrol has increased by more than 120% and on Diesel by more than 400% in last 3 Years. Although the hike was done from November 2014 till December 2015. But this was one of the major reasons for ensuring that Fuel Prices remains high

Below is the quantum of Excise Duty

  Tax in November 2014 Tax in September 2017
Excise  Duty on Petrol Rs 9.20 per Litre Rs 21.48 per Litre
Excise  Duty on Diesel Rs 3.46 per Litre Rs 17.33 per Litre

2. Higher VAT Duty: GST Framework does not apply on Petroleum Products. Unsure why ? But States charges a high VAT Duty on Fuel Prices. VAT is imposed on Gross Price inclusive of Excise. Means Tax on Tax. 

Below are VAT Duty Framework as applied on Petrol which ranges from mere 6% to as high as 47.6% within India in Different States

Excise Duty Updated in September 2018

States with Highest VAT on Petrol VAT Duty   States / UT with Lowest VAT on Petrol VAT Duty
Maharashtra - Mumbai, Pune 39.1%   Andaman & Nicobar Island 6.0%
MP 35.7%   Goa 17.0%
Punjab 35.1%   Arunachal Pradesh, Tripura, Mizoram 20.0%
Telangana 33.3%   Meghalya 18.9%
Kerala 30.3%   Nagaland 23.2%
Tamil Nadu 32.1%   Manipur 23.6%
Rajasthan 30.8%   Orissa, Bihar 24.7%
Assam 30.9%   Haryana 26.2%
Uttarakhand 27.15%   West Bengal 25.2%
J&K 27.3%   Himachal Pradesh 24.4%
Delhi 27%   Uttar Pradesh 26.9%
Karnataka 30%   Gujarat 25.4%
      Chattisgarh 26.8%
      Jharkhand 25.7%
      UT - Dadra nagar Haveli, Puducherry, Daman 20%

Diesel although has some relaxation on VAT (as against Petrol) but on standalone basis has average VAT of 20% to 25% in most of the States. In Delhi – although its one among lowest at 16.75%+ 25 paise cess. 

In Last 3 Years - VAT Duty is also been hiked by most of the states contributing to high Fuel Prices

3. Hike in Refinery and OEM Costing: The Refineries and OEM almost make up to Rs 9 per Litre as cost of processing, transportation, margins etc. This is increased considerably from Rs 6.8 per Litre to Rs 9 per Litre making it  more than 30% hike in same in last 1 year

4. Increase in Petrol Pump Commission – Although Marginal but an increase in Petrol Pump Commissions from rs 2.42 per Litre (Petrol) / Rs 1.54 per Litre (Diesel) has increased to Rs 3.23 per Litre (Petrol) / Rs 2.17 per Litre (Diesel) in last 1 year. Although the amount in rupee terms is lesser, but in percentage terms – Commissions on selling Petrol and Diesel increased by more than 35% in last 1 year

Overall End Result: All this has Led to ensure that Fuel Prices remains High.

Do you know that Crude Oil Cost once processed and refined and converted to Final Petrol and Diesel along with even Transported to Fuel Stations - costs not even Rs 30 per Litre. Rest all are Taxes (except some small Dealer Commissions)

As in September 2017 - an Indian Consumer looking to fill Petrol and Diesel is paying up approximate Taxes

» Petrol - Rs 36 per Litre as Taxes in Delhi. Rs 46 per Litre as Taxes in Mumbai 

» Diesel - Rs 27 per Litre as Taxes in Delhi. Rs 30 per Litre as Taxes in Mumbai 

This is close to 55% in Petrol and around 45% in Diesel - which is one among highest in world

This all has led to High Fuel Prices. Hopefully - by now you would come to know the reason why Fuel Prices are high in India. In case you seek detailed Breakup of Petrol and Diesel Prices - refer on Fuel Price Calculation Sheet

Hopefully it answers your Dillemma of Reasons of High Petrol and Diesel Prices in India

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Comments 8

Guest - Siva on Wednesday, 18 March 2020 15:37

Modi govt is looting by keeping tax of 26.50 while refined petrol will be available at 28. And crude just 17. And state govts looting 20 from us .

Modi govt is looting by keeping tax of 26.50 while refined petrol will be available at 28. And crude just 17. And state govts looting 20 from us .
Guest - George Johnson on Friday, 01 June 2018 18:56

We should remember we are getting oil from U S that to the poorest quality of oil available ie shale oil. We have the best quality oil with our neighbhour Iran wonder why we ignore this close source of excellent quality oil (easy to refine), strange, Venezuala has also offered to sell oil to India for Indian Rupees this is the best offer have had our Govt should immediately increase imports of oil from Venezuela. Since they sell in Rupees it will also boost our exports. Hope the concerned people will take maximum advantage of this offer.

We should remember we are getting oil from U S that to the poorest quality of oil available ie shale oil. We have the best quality oil with our neighbhour Iran wonder why we ignore this close source of excellent quality oil (easy to refine), strange, Venezuala has also offered to sell oil to India for Indian Rupees this is the best offer have had our Govt should immediately increase imports of oil from Venezuela. Since they sell in Rupees it will also boost our exports. Hope the concerned people will take maximum advantage of this offer.
Guest - Wincy on Friday, 16 July 2021 22:46

Its all match fixed ,, cannot expect change

Its all match fixed ,, cannot expect change
Guest - raveesh on Wednesday, 23 May 2018 14:38

Informative.

Informative.
Guest - varunraj on Saturday, 11 November 2017 19:36

so what is the solution for this hike........

so what is the solution for this hike........ :(:(
Guest - Madhu S on Tuesday, 07 November 2017 13:45

Central Government is charging excise duty of 75% of Base price, State government is charging 30-50% of VAT of Base price. and they are reducing in 1-2 rupees. Shame on Indian government. Shame on Indian Politics. Indian Government never Works to the Common people.

Central Government is charging excise duty of 75% of Base price, State government is charging 30-50% of VAT of Base price. and they are reducing in 1-2 rupees. Shame on Indian government. Shame on Indian Politics. Indian Government never Works to the Common people.
Guest - Yogesh on Thursday, 15 November 2018 20:46

Don t you have any sense , it has said clearly that we are buying the crude oil for dollars not in rupees. So the price is so high as the Rupee value is deteriorating.But in recent advancements our govt is trying to buy it from Iran to avoid more cess. Think before you speak about the central govt.

Don t you have any sense , it has said clearly that we are buying the crude oil for dollars not in rupees. So the price is so high as the Rupee value is deteriorating.But in recent advancements our govt is trying to buy it from Iran to avoid more cess. Think before you speak about the central govt.
Guest - Saahil on Monday, 16 October 2017 09:21

Hello,

BJP led Government has reduced VAT on petroleum products
1. Gujarat - 4% VAT Duty Cut, with it Gujarat is now 24.96%
2. Maharashtra - VAT reduced by Rs 2 on Petrol and Rs 1 on Diesel
3. Madhya Pradesh - VAT cut by 3% on Petrol and 5% on Diesel
Also been slashed in Karnataka

In near future - Uttar Pradesh, Uttarakhand also to slash in VAT on Petrol and Diesel

Hello, BJP led Government has reduced VAT on petroleum products 1. Gujarat - 4% VAT Duty Cut, with it Gujarat is now 24.96% 2. Maharashtra - VAT reduced by Rs 2 on Petrol and Rs 1 on Diesel 3. Madhya Pradesh - VAT cut by 3% on Petrol and 5% on Diesel Also been slashed in Karnataka In near future - Uttar Pradesh, Uttarakhand also to slash in VAT on Petrol and Diesel
Tuesday, 26 September 2023

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