Case on Pricing: What leaves our pockets empty in the name of Petrol?


Rising petrol prices are a matter of concern for every Indian and off late, Indians are being pushed to the extreme to empty out their pockets in the name of petrol for their travel needs.  The current scenario shows that there is hardly any house inIndiawithout a vehicle and the apparent rise in petrol prices is leaving everyone in the dark.

The major question now is, Why petrol costs so much in our country? Earlier, the prices of petrol would remain constant in spite of the fluctuations in the crude oil prices in the international market. However, the Indian Government,  has bid adieus to the policy and now its a new policy phase, where it is keen about fetching revenues, hitching the budgets of common man.

It was the decision to link domestic petrol prices with the international crude oil prices in the year 2010 that caused this big change. Statistics show the number of increases in price outwits price-cuts. The steepest rise in petrol prices, however, came out in April 2012, when the price was increased about Rs. 7.50.

A crude oil barrel currently costs around $119 and at this stage the price is R.s 40.40 per litre of crude. The supply of crude oil from international market to refineries inIndiaand the process of separation of crude oil from petrol makes the cost reach Rs. 44.80 per litre of Petrol. The price component at this stage is inclusive of excise duty and VAT.  However, a number of components gets added to the price before reaching the customer and the finally the customer ends up paying heavy amounts for petrol.

The distribution is as follows:

v     An excise duty @ Rs. 9.20 per litre

v     Education Cess @ 3 per cent

v     Total excise duty plus education cess at Rs. 9.48.

v     A commission for the dealer at Rs. 1.79

v     A 25 per cent VAT at Ra. 11.79

v     Total duties and taxes at Rs. 22.49

The price of petrol at this stage is Rs.  67.29 (Delhi). Petrol Prices inIndiavary in each place depending upon the VAT and other levies. Petrol prices are the highest inIndiaacross the world. An in-depth analysis show Indian consumers pay more as taxes than the original prices of petrol. Why government has not been able to keep the petrol prices low when it is being sold in our neighboring countries at a far lesser cost? Why the tax levels are still the same when the number of vehicles sold inIndiahas gone up?



Please enter your comment!
Please enter your name here