Moneycontrol
Last Updated : Apr 03, 2018 02:18 PM IST | Source: Moneycontrol.com

Oil prices decoded: Who gets what when you fill up your vehicle with a litre of fuel

India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates

Moneycontrol News @moneycontrolcom

Petrol prices on Monday hit a 4-year-high selling at Rs 73.83 per litre while diesel rates touched an all-time high of Rs 64.69 in the national capital. In Mumbai, the prices were even higher given the higher rate of VAT levied by the state government.

Though the crude prices have surged recently due to the decisions by oil-producing countries to reduce the production, India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates.

Fuel price build-up

Crude oil price on Monday opened at USD 69.33 per barrel which pegs the price of one litre of crude oil to Rs 28.35. The price is calculated assuming an average dollar-rupee conversion rate of Rs 65.03 per dollar and one barrel equals to 159 litres.

As per the build-up of petrol price provided by Indian Oil Corporation, it provides a litre of petrol to its dealers at Rs 35.05, charging Rs 3.07 for ocean freight and other logistic charges and Rs 3.63 for marketing cost, margin, freight and other charges.

At the dealership level, a total excise duty of Rs 19.48 is levied by the central government. Add average dealer commission of Rs 3.60 to it and the price reaches Rs 58.08 for one litre of petrol.

Now every state government levies a different rate of value added tax (VAT) and surcharges, the reason petrol prices vary across India.

In Delhi, the state government levies 27% VAT on petrol. In Rupee terms, the total VAT in Delhi pegs at Rs 15.70 per litre, taking the petrol prices to Rs 73.83.

The highest VAT on petrol is charged by the Maharashtra government for Mumbai, Thane and Navi Mumbai region at 40.37%.

Following is the detailed break-up of the non-branded petrol price (on April 2) you pay in Delhi:
Elements Prices (in Rupees per litre)
Crude oil 28.35
C&F (Cost & Freight) Price (Moving average basis) 31.08
Price charged to dealers (excluding excise duty and VAT) 35.05
Add: Excise Duty Basic excise duty 4.48 19.48
Special additional excise duty 7
Road and infra cess 8
Add: Dealer commission (average) 3.60
Add: VAT- Delhi (including VAT on Dealer Commission) @27% 15.70
Retail selling price 73.83
Similarly, following is the detailed break-up of the non-branded diesel price (on April 2) you pay in Delhi:
Elements Prices (in Rupees per litre)
Crude oil 28.35
C&F (Cost & Freight) Price (Moving average basis) 33.16
Price charged to dealers (excluding excise duty and VAT) 37.31
Add: Excise duty Basic excise duty 6.33 15.33
Special additional excise duty 1
Road and infra cess 8
Add: Dealer commission (average) 2.52
Add: VAT- Delhi (including VAT on Dealer Commission) @17.30% 9.53
Retail selling price 64.69

Since the BJP government came to power, the finance ministry has raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell to as low as USD 30 per barrel.

The first cut in the excise duty by Rs 2 per litre was applied in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14.

Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT but just four of them—Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh—reduced rates while others including BJP-ruled ones ignored the call.

Because of the reduction in excise duty, diesel prices had on October 4, 2017 come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre. However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.

In February, the government cut excise duty by Rs 2 and additional excise duty on fuel by Rs 6 but imposed a new road cess of Rs 8 per litre nullifying the effects of the cuts.

In June last year, the leading oil corporations in the country decided to revise the price of fuel daily instead of twice in a month—the 15-year-old practice which was employed by them earlier.

(Oil price and taxation information sourced from Petroleum Planning and Analysis Cell, Government of India)
First Published on Apr 2, 2018 01:20 pm
Sections
Follow us on
Available On