Fuel prices in the country have started skyrocketing again. Petrol has crossed 100 in some cities. In such a situation, the question arises again and again that if crude oil is cheap, then why is petrol so expensive? The special thing is that in the last six years i.e. since 2014, the Central Excise Duty on petroleum products has increased by more than double.
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Actually there is a formula, on the basis of which the price of the fuel sold at the petrol pump is decided. It includes all the things like crude oil price, transportation, refinery expenses, taxes of central and state governments, commission of pumps etc.
It is true that India imports most of the fuel it needs. The price of crude oil is determined internationally by the Organization of the Petroleum Exporting Countries (OPEC). India also has to buy crude oil at the rate fixed by OPEC. But even when crude oil prices fall, consumers in India pay higher prices for petrol and diesel, this has to be understood.
Prices are decided by TPP formula
The price of oil sold to customers at the pumps is determined by the Trade Parity Pricing (TPP) formula. Its ratio is 80:20. That is, 80 percent of the value of petrol and diesel sold in the country is linked to the prices of fuel currently being sold in the world market. The remaining 20 per cent is added as per the estimated value. Experts say that the cost of refining and marketing crude oil in India has nothing to do with the actual fuel prices at the pumps.
Reserve Bank gave this reason
The price of petrol has crossed 100 in cities like Mumbai and Bhopal. Prices in Delhi are around Rs 95 per litre. The Reserve Bank has given suggestions to rein in the rise in oil prices. According to the bank, the main reason for the price increase is the taxes levied on petroleum products by the Center and the states.
All states charge tax from their own rates, this is the math of one liter of petrol in Delhi
In this way the dealer got Rs 34.55 per liter. After this, excise duty was also levied on it at Rs 32.89 a litre, dealer’s commission was Rs 3.77 a liter, the VAT of 22 percent Delhi government was about Rs 21.36. In this way the final selling price per liter all together becomes Rs 92.578 a litre.
According to a report in the Indian Express, in December last year, on the base price of petrol in Delhi, the center and states used to charge 180 per cent tax, while on diesel 141 per cent. On the other hand, in Germany 65 per cent of the fuel is taxed at 65 per cent and in Italy only 20 per cent.
The earnings of the central government also increased by 307 percent in the last six years.
According to government data, in the last three years, the government’s income from tax from petrol and diesel has increased by more than three times. Between April 2020 and January 2021, the government has raised revenue of Rs 2.94 lakh crore through tax on oil.
During this period, the prices of crude oil in the world market came down, even after this, the central excise duty on it continued to increase. It reached 12.2 per cent in 2020-21, while it was 5.4 per cent in 2014-15.
Recently, in the Lok Sabha, Finance Minister Anurag Thakur, in response to a question, had said that in the last six years, the total tax collection through Central Excise Duty on petrol and diesel has increased by 307.3 percent. In this, the tax collection from petrol alone has increased by 206 percent and from diesel by 377 percent.
Petrol price in major cities on Saturday (Rs per litre)
Diesel Price (Rs per litre)