Prices of Petrol or Diesel directly or indirectly have an impact on every one of our lives. How does that fuel priced in India ?
Recent times, petrol and diesel prices have seen a hit, and why does it keep on increasing ? How is fuel priced in India ?
India’s fuel prices are de-regulated and can be varied every fortnight based on the changes in the price of crude oil and taxes. India imports crude oil from overseas for more than 60% of its oil needs. The fuel is imported by Oil Marketing Companies in India such as IOCL, BPCL and HPCL. The transportation costs of importing the oil is added to price of the oil. The price of the oil in international market plays a major role in the price of fuel in India.
After crude oil is imported into the country, it is sent into refineries to convert the oil into consumable form like petrol or diesel. The transportation of oil to and from refineries along with the cost of refining the oil is added into price of the fuel. After de-regulation of fuel prices, most of these costs such as refinement of oil is decided by the Oil Marketing Companies. But most of these companies are state-owned and thus the government and local politics has an influence in fuel pricing.
After the oil is refined, Central Exercise Duty Tax (Rs.14.95/lt + 3% education cess) is added to the fuel before it is sold with a marginal profit for OMC’s to its local dealers.
The dealers add a commission of Rs.2.03/lt before it is sold to the public with the price coupled with Value Added Tax. The price of petrol and diesel is not included in common GST tax system in the country. And thus each state decides how much VAT should be added to the petrol prices. VAT for petrol vary from 40% being charged in Maharashtra to mere 6% in Andaman and Nicobar Islands.
The price of fuel plays a major role in the economy of the country. Too high, the price of other day-to-day goods also increase as fuel is one of the main needs of any economy. And the government has a greater role in keeping the fuel prices in the country checked when the crude oil prices in international market is high.
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