How Petrol prices are calculated in India?

  •  Mr. H
understanding petrol pricing in
Image source: Google

We all know petrol/fuel prices are directly related to the commodities. As the result, we have to pay more if prices are on peak because of transportation cost which is added in Retail Selling Price (RSP) in any commodity.

Fuel prices are on the peak in both Petrol and Diesel in recent times.

Here is a quick note:

The major reason for the rise:

  • Depreciation of rupees against the dollar by crossing records lows of INR 71/$1
  • Hike in the price of Crude Oil from $41 to $81 per barrel.

Below chart will give you a glimpse of how fuel/petrol prices are calculated in India:

FactorsPetrol PriceDiesel Price
International Price of Crude Oil with Ocean Freight (as on September 2018)$79.93 or Rs 5700 per Barrel$79.93 or Rs 5700per Barrel
1 Barrel of Crude Oil159 Ltr.159 Ltr.
Crude Oil  – Cost per LitreRs 35.89 per Ltr.Rs 35.89 per Ltr.
Basic OMC Cost Calculation *
Entry Tax, Refinery Processing, OMC Margin, Freight CostRs 3.45 per Ltr.Rs 7.14 per Ltr.
Basic Cost of Fuel after Refining CostRs 39.34 per Litre Rs 43.03 per Litre 
Additional: Excise Duty + Road Cess as Charged by Central GovernmentRs 19.48 / Ltr. on PetrolRs 15.33 / Lit on Diesel
Pricing Charged to Dealers before VATRs 58.82 per Ltr.Rs 58.36 per Ltr.
Calculating Dealer Retail Price – Base Location Delhi
Commission to Petrol Pump DealersRs 3.63 per Ltr.Rs 2.53 per Ltr.
Fuel Cost Before VAT (rounded off for approximation)Rs 62.45 per Ltr.Rs 60.89 per Ltr.
Additional:VAT (Varies from State to State – 27% on Petrol & 16.75% on Diesel + 25p as Pollution Cess with Surcharge)Rs 16.86 / Ltr. on PetrolRs 10.45 / Ltr. on Diesel
Final Retail Price as on Sept 2018 (calculation)Rs 79.31 per Ltr.Rs 71.34 per Ltr

*For illustrations.

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