Why are petrol prices not decreased in India when international prices of crude oil are low?

You will be surprised with agony and angry when you come to know that crude oil is costing only Rs. 31 per liter whereas Petrol and diesel are hovering at Rs.76-80 in India. One more fact that many people are not aware is Petrol and Diesel prices change every day based on the International market prices of Crude Oil and Foreign Exchange Rates. Earlier these prices were changed fortnightly i.e. on the 1st and 16th of each month based on the average price of crude oil and foreign exchange rate of the preceding 15 days.

There are many reasons why there is a steep hike in the prices of Petrol and Diesel in the past one year. Such as

  • Hike in Crude Oil Prices from 45$ / Barrel to 71$ / Barrel (One barrel = 159 ltrs.)

  • Increase in Petrol Pump Commissions by almost Rs 1 per Litre in Petrol and Diesel

  • Introduction of Road Cess of Rs 8 per Litre by the Central Government.

If we get into the calculation of Oil prices, here it goes.

Simplified Calculation Chart for Petrol & Diesel Prices in New Delhi - (20th May 2018)

Petrol Price *Diesel Price Calculation *
International Price of Crude Oil with Ocean Freight (as on 20th May 2018)72.5 $ or Rs 4930 per Barrel72.5 $ or Rs 4930 per Barrel
1 Barrel of Crude Oil159 Litre159 Litre
Crude Oil - Cost per LitreRs 31 per LitreRs 31 per Litre
Basic OMC Cost Calculation *
Entry Tax, Refinery Processing, Landing Cost & Other Operational Costs along with MarginsRs 2.62 per LitreRs 5.91 per Litre
OMC Margin, Transportation, Freight costRs 3.31 per LitreRs 2.87 per Litre
Basic Cost of Fuel after Refining CostRs 36.93 per LitreRs 39.78 per Litre
Additional: Excise Duty + Road Cess as Charged by Central GovernmentRs 19.48 / Litre on PetrolRs 15.33 / Lit on Diesel
Pricing Charged to Dealers before VATRs 56.41 per LitreRs 55.11 per Litre
Calculating Dealer Retail Price - Base Location Delhi
Commission to Petrol Pump DealersRs 3.62 per LitreRs 2.52 per Litre
Fuel Cost Before VAT (rounded off for approximation)Rs 60.03 per LitreRs 57.63 per Litre
Additional:VAT (Varies from State to State - 27% on Petrol & 16.75% on Diesel + 25p as Pollution Cess with Surcharge)Rs 16.21 / Lit on PetrolRs 9.91 / Litre on Diesel
Final Retail Price as on 20th May 2018 -(calculation)Rs 76.24 per LitreRs 67.54 per Litre

* Prices as of 20th May 2018, an approx cost for Basic OMC Cost calculation.

(calculation courtesy - mycarhelpline.com)

I think at least now we understand that we are paying more taxes than the actual price of the oil, and perhaps paying one of the highest prices in the world, more than the USA. If these taxes are minimized, we can go back to the dream world where petrol and diesel would cost Rs.35 - 40. Given the present political conditions, we cannot even dare to dream of that !!