Understanding Petrol Pricing in India


Fluctuating Fuel prices is one topic that always comes up when petrol-heads have a conversation. Everyone has an opinion as to why the prices fluctuate as it happens. Most of the people believe that fuel price is entirely dependent on global crude oil price. However, that is not only factor involved in fuel pricing. The various parameters which affect petrol pricing are as follows:


Crude oil price: Crude oil is purchased in the form of barrels. These barrels will be transferred to the buying country by means of large container ships.

Freight Charges: This includes the cost of transporting the crude oil from the source to the buying country.

Refinery Transfer Price : This is the price paid by the oil companies like HP to petroleum refineries to carry out the refinery process.


Price Charged to Dealers: Dealers are essentially the owners of petrol bunks. They charged  a small fee which is in turn added to the petrol price. This is excluding VAT.

Specific Excise Duty: This is a duty charged by the Central government that is added to the overall petrol price.

Dealer Commission: The dealer will be paid commission to carry out his services. This is also added to the petrol price

VAT (Value Added Tax): Value added tax is charged accordingly by the state government. It differs from state to state.    

This useful video by Factly will shed more light on the topic. 


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