Fuel prices in India have been a huge talking point for quite some time now. The price of petrol and diesel in the country has been on a constant upswing for the last few months. With the state assembly elections now done away with, the daily rise in the price of petrol and diesel have started once again after a brief pause last month. In fact, in the month of May, the price of petrol and diesel were hiked for as many as 16 times, resulting in highest ever prices in some cities.
As of May 29, 2021, the price of petrol in Mumbai stood at INR 100.19 per liter, while the price of diesel was INR 92.17 per liter. Meanwhile, the price of petrol in Delhi on May 29 was INR 93.94 per liter and diesel was being retailed for IINR 84.89 per liter. In May, the cumulative hike for petrol was INR 3.3 and for diesel, it was INR 3.89. Again, as of June 2, 2021, the price of petrol in Mumbai is INR 100.72 and the price of diesel in INR 92.69, thus recording a hike of 53 paise and 52 paise respectively over the last three days.
| Break-Up Of Components of Fuel Price in India | Petrol |
| Base price | INR 34.19 |
| Freight | INR 0.36 |
| Price charged to dealers (excluding excise duty and VAT) | INR 34.55 |
| Excise Duty | INR 32.9 |
| Dealer commission (Avg) | INR 3.77 |
| VAT (Includes tax on dealer commission) | INR 21.36 |
| Retail price (Rounded) | INR 92.58 |
Here, it becomes important to understand the amount of taxes you pay when you buy fuel. The retail price of the fuel has various components including a number of taxes. In fact, the retail price you pay has more taxes in it than the base price of fuel. Above is a break-up of the components of the price of petrol in Delhi as of May 16, 2021. As you can see in the table, the base price of petrol is just INR 34.19 per liter out of the INR 92.58 per liter retail price.
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The Central Government charges 35.35% tax as Excise Duty on the price of petrol, which amounts to INR 32.90 per liter. Meanwhile, the State Government of Delhi charges a VAT of 23%, which amounts to INR 21.36 per liter. It is this VAT that differs from state to state and that is why we have different fuel prices across India. So the total tax on petrol amounts to INR 54.26, which is 58.6% of the retail price.
Similarly, in the case of diesel, which costed INR 83.22 in Delhi on May 16, there's an Excise Duty of INR 31.8 per liter or about 38.21% of the retail price. Meanwhile, the amount of VAT levied is INR 12.19 or 14.64%. In total, the cumulative taxon diesel is INR 43.99 or 52.85%. It is because of such high taxes that the prices of fuel in India remain on the higher side. Currently, India imports about 82% of its fuel demands from foreign markets, also contributing to its high price. The government really needs to revise the tax structure or increase dependence on locally produced alternate fuels.
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