Poor Economics – Petrol prices and diesel prices in major Indian cities

Petrol prices and diesel prices in major Indian cities


Check this link if you want to know about the petrol prices in India. Also moat of it goes for tax.

The real culprit for high petrol prices in India are the taxes.
The problem is that we fail to ask how much petrol really costs. Let’s try some simple arithmetic. International crude oil prices are hovering around US$ 112.5 per barrel. That translates to about Rs 5,085 per barrel. Each barrel contains about 158.76 litres. So, effectively crude oil costs Rs 32 per litre. Now, add the cost of refining it to petrol or diesel. According to an oil company official, the refining cost is about 52 paise per litre. Add about Rs 6 as capital costs for the refinery. Then there’s the cost of transportation (Rs 6) and dealer’s commission (Rs 1.05). So, adding all that, the price of petrol comes to about Rs 45.6 per litre. But how much are we actually paying for petrol? Rs 68.3 in Mumbai, Rs 63.4 in New Delhi, Rs 71 in Bangalore!

The above calculation is based on assumption of the output of the refining. There are other products which are salable like TAR, Kerosene, which give additional Revenue.
If petrol is so Cheep why do we pay so much as a customer.

Now the devil is in the details. There are some taxes which are in the order of 50%.
  • Basic Price
  • Excise duty: – 45-50%
  • Education Tax: –
  • Dealer commission: 3-4%
  • VAT: 25%
  • Crude Oil Custom duty: 3-4%
  • Petrol Custom: 3-4%

Add the city levies and road buiding fund leview which are being added to this.

Then how about the subsidies on the petroleum products. This is an eye wash from the governments. these are only promises. this is given directly to the Oil marketing companies (sometimes). If not the Government gives some bonds. Now the common man gets the burden of the interest.

the Oil Marketing Companies are really over staffed. they can go on strike at any time. They are splurging the public money on various activities. For Example, should they spend on advertising their products?. The ads are selective. 
This is poor economics

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