Breaking down the Petrol & Diesel Prices
Sai Krishna Muthyanolla
September 5, 2018
The Petrol & Diesel prices have 4 different components. Here is an explanation of these components
The Petrol & Diesel prices have 4 different components. Here is an explanation of these components
Price Charged to Dealers: The Oil Marketing Companies or OMCs as they are called charge this price to the dealers. IOCL, HPCL & BPCL may charge a marginally different price to the dealers because of various other factors. This price is arrived at based on factors like Global Crude oil price of the Indian Basket, price incurred on freight, exchange rate of US Dollar, price incurred on refining etc.
Central Excise Duty: The Central Excise Duty is levied by the Central Government (Government of India). This is a fixed amount and not a percentage on the price.  The excise duty on Petrol increased from Rs 9.48 per liter to a high of Rs 21.48 per liter by January 2016. In October 2017, the excise duty on Petrol was reduced by Rs 2 per liter, the first such reduction by the current BJP government.  On the other hand, the duty on Diesel increased by more than 4 times from Rs 3.56 per liter to a high Rs 17.33 per liter. Like Petrol, the duty was reduced by Rs 2 per liter in October 2017 to Rs 15.33 per liter.
Dealer Commission: This is the amount of commission paid by the OMCs to the petrol pump dealers. The dealers manage all their expenses with this commission.
State specific VAT/Sales Tax: The State Governments levy Value Added Tax (VAT) or sales tax on the price arrived at by adding dealer price, central excise duty & dealer commission. This is usually a mix of percentage & a fixed amount. The State VAT on petrol is at least 25% in 21 states with the highest in Mumbai at 39.54%. The State VAT on diesel is more than 20% in 14 states and highest of 28.31% in Andhra Pradesh.
The following infographics explain both the Petrol & Diesel price breakup in terms of components explained above including the end price to the consumer.
Note: All the data presented in this story is as of 3rd September, 2018