Petrol price Calculation: Know how prices of petrol are calculated in India and why prices of petrol are constantly rising

Publish Date: 26 Feb, 2021 |

Petrol price Calculation:

While in the past few days, there have been much talks across the country about the constant hike in the prices of petrol and diesel. And as per the recent reports, the Prices of Petrol has crossed Rs. 90 per litre in Delhi while Diesel being charged at Rs. 81 per litre. While the government has stated the increasing price of global crude oil as the reason for this constant hike. The government has further added that global crude oil prices have gone up by more than 50% to over USD 63.3 per barrel since October 2020, thereby persuading the oil retailers to increase the pump prices.  

Further in this article, you will walk through the process of determining the prices of petrol in India.


How Petrol Prices are calculated in India?

Determining the prices of petrol is one of the crucial tasks as it is that one commodity which affects the citizens of India deeply and affects their routine life a lot. Petrol is a commodity that doesn’t come under the purview of Goods and Service Tax (GST). The retails selling price of Petrol in India is determined from factors such as Crude Oil, OMC margin, Transportation cost, freight cost, central government taxes, state government taxes, excise duty and other taxes.   


  • Crude Oil: Crude oil is one of the biggest factors which affects the retail selling price of petrol, while India is one of the biggest importers of crude oil. The overseas crude oil firms are paid by Indian oil manufacturing companies with some additional charges along with freight and insurance charges to obtain oil, as crude oil is required for oil processing. For Instance: If the cost of one barrel of crude oil (equal to 159 litres) is INR 4200, then one litre of crude oil costs INR 26.42
  • OMC Costs: The crude oil is refined into petrol by the oil marketing companies and then sold to the dealers. While selling petrol to the dealers, these companies add their own profit margin, which also includes transportation cost, operational cost, refinery processing cost and others. 
  • VAT: Different states charge different Value Added Tax (VAT) on petrol, which further leads to different prices of petrol across different states and cities. 
  • Central and state taxes: The Excise Duty charged on petrol is homogenous across all the nations. The current excise duty being levied by the Indian Government is Rs. 21.48 per litre. 

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