look news india
Whenever we go to the petrol pump to fill fuel in our car, this question definitely comes in our mind that on what basis do the prices of petrol and diesel change every day or every month. Actually, the price at which we get 1 liter petrol or diesel, its actual cost i.e. base price is much less than its final retail selling price. Oil marketing companies (OMCs) in India like Indian Oil, Bharat Petroleum and Hindustan Petroleum fix fuel rates every morning keeping in mind the international market trends. After this, various types of taxes, freight charges and commissions are added to this base price, after which the final rate of oil is decided.
Direct effect of international crude oil rates and dollar-rupee exchange rate.
The first and foremost factor behind petrol and diesel becoming expensive or cheap in India is the price per barrel of crude oil in the international market. India imports about 80 to 85 percent of its crude oil requirement from foreign countries. The second big factor is the exchange rate of Indian Rupee against US Dollar (Rupee vs Dollar Exchange Rate). Since India purchases crude oil from the international market in dollars, if the dollar strengthens and the rupee weakens, importing crude oil becomes expensive. Its direct effect is visible in the form of increase in the prices of Indian petrol pumps.
Heavy tax burden: Central excise duty and state VAT
The largest share in the total price of fuel is the taxes imposed by the central and state governments. The third factor is ‘Central Excise Duty’, which is collected by the Central Government at a fixed rate on every liter of oil. The fourth major factor is the ‘Value Added Tax’ (VAT) or sales tax collected by the states. Every state government sets VAT rates differently according to its budget and priorities, which is why there is a huge difference in the prices of petrol and diesel in different cities like Delhi, Mumbai, Jaipur or Chennai.
Sum of refining costs, freight charges, dealer commission and other costs
Apart from these major taxes, 4 other technical factors also decide the final bill of petrol and diesel. The fifth factor is ‘refining cost’ and margin, i.e. the cost of converting crude oil into usable petrol-diesel by cleaning it in refineries. The sixth factor is ‘Freight Charges’, which is the transportation cost of delivering oil from the refinery to the petrol pumps. The seventh factor is ‘Dealer Commission’, which is given to petrol pump owners as part of their operating expenses and profits. Finally the eighth factor is the global balance of ‘Demand & Supply’. By combining all these 8 factors, every rupee that goes out of your pocket is calculated.