High taxes & daily revision: The fuel pricing process
Petrol prices have been in the rise for the past few days as the lockdown measures ease and country steps to the new normalcy. But, how are the fuel prices in India fixed and revised daily?
Introduction of the daily revision
Earlier, fuel prices were revised every fortnight i.e., on 1st and 16th day of every month. But from June 2017, a new move was announced, the dynamic fuel price method was put in place in which fuel prices are supposed to be revised daily. This scheme was introduced to ensure that every day’s variation in global oil prices can be transmitted to fuel users and dealers.
Therefore, the actual daily change is said to be impacted by the movement of the international price of Brent Crude Oil and the currency exchange rate.
The calculation process
Currently, the petrol prices are structured by the excise duty + value added tax (VAT). While the excise duty is collected by the central government, the VAT goes to the state government’s revenue.
Apart from the crude oil cost, the base fuel price includes freight charges, processing, refining, margins for oil marketing companies and such.
The base price of a litre of petrol would cost only say around ₹20 per litre in Delhi but together with the cost of crude oil, the central and state taxes, freight and dealers commission, the price for consumer ends up to say ₹71 a litre.
Last month, the central government hiked excise duty by ₹10 per litre on petrol and ₹13 per litre on diesel. The excise duty on petrol is taxed around ₹33 per litre and that on diesel is ₹32. Delhi government also raised VAT on petrol and diesel to 30%. After the excise duty hike, both central and states taxes now make up to 70% of the fuel retail prices.
The oil companies had kept the prices on hold since March 16. But now looks like the state-run oil marketing companies are back with revision of the prices of petrol and diesel from time to time.
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