30-July-2022: Fuel Price Calculation in India
In our country, the price of petroleum products is a very critical and
sensitive issue. And it is made still worse by propaganda, mis-information,
rumour, dis-information, etc. Here, I have tried to explain the method of
calculation for the Fuel Price, in a very simple way.
Before that, a few important points to remember:
- Our country, having a population of 1.4 Billion (140 Crore) people has huge consumption.
- But we have the internal resources for only 15 - 20%, the rest 80 - 85% has to be imported.
- We have to purchase the Crude oil from the international market, by paying in USD.
- So the Forex Rate and Forex Reserve come into play significantly.
- Being the cash-cow of the Government, the taxes remain very high- excise for Central Govt., and VAT for State Govt. None of the parties are willing to sacrifice this in private, even though some protest it publicly.
- The Public Sector Oil Manufacturing Companies (OMCs) must be profitable else they will be a burden to the exchequer.
- Then there are other things like shipment, transportation, dealers’ commission, etc.
Now let’s try to calculate the Petrol / Diesel in India. These can be
done in 5 simple steps:
|
SN. |
Description |
Petrol |
Diesel |
|
1. |
Input cost per Litre =
[Crude Price in USD / Barrel] X [USD / INR Rate] / [ Litres / Barrel]. Note:
One Barrel contains 159 Litres. Crude Price includes shipping Freight etc. |
|
|
|
|
So if Crude Price is 97 $,
Forex Rate is 79 Rs/$, then Input Cost = (Rs./Ltr) |
97 X 79 / 159 = 48.20 |
97 X 79 / 159 = 48.20 |
|
2. |
Cost of Processing: For
Petrol 15 % and Diesel 18 % Approx. (Includes Transport) |
48.20 + 15% |
48.20 + 18% |
|
|
So the Base Prices are
(Rs./Ltr) |
= 55.40 |
= 56.90 |
|
3. |
Central Excise Taxes are approx
Rs. per Ltr respectively |
= 19.90 |
= 15.80 |
|
|
Gross Prices at the entry
of Petol Pump. (Rs./Ltr) |
= 75.30 |
= 72.70 |
|
4. |
The Dealers’ Commission
added. (Rs./Ltr) Approx |
= 3.50 |
= 2.50 |
|
5. |
State VAT – Varies from
15% to 35% (Rs./Ltr) Approx |
= 22.60 |
= 13.80 |
|
|
Final Price for Customers (Rs./Ltr)
Approx |
= 101.40 |
= 89.00 |
This example is closest to the Bangalore price as of today. Since the Crude Price and the USD exchange rate varies on the day to day basis, so the GoI refreshes the Prices every day at 6 AM.
There are some States, which impose other surcharges additional to VAT.
Disclaimer: Please note that this calculation is for understanding the mechanism, and is not purported to be the actual one.
[ Source: Various Websites ]
