The rise in the number of vehicles running in the road has increased in the past years contributed to the increased fuel prices in India.
It is the major reason why diesel prices are different in cities across India. Cities, where fuel is transported to longer distances, will be highly-priced than to the places which are nearer to the oil companies’ storage area.
It is also one of the major factors affecting fuel rates in India. For importing oil from other countries, Indian Oil companies have to pay in Dollars but its expenses are in rupees. Hence, if the rupee rate plunges a large amount will have to be paid for the USD.
The local government policies which impose taxes vary. Therefore, when the Government of India raises tax rates, the petrol prices also increase.
The price of fuel in India is directly related to the crude oil price Internationally. Any change internationally changes the pricing in India. An increase in international demand, low production rate or any kind of political unrest affects the pricing tremendously.
An increase in supply directly affects the fuel price. For up to six weeks the oil refining and marketing companies maintain crude oil inventory, which also directly influences the price of fuel.
The Central Government levies the Central Excise Duty. It is not a percentage on the price but a fixed amount.
The OMCs or Oil Marketing Companies charge this price to dealers. The price decision is arrived at based on other factors like the exchange rate of US Dollar, price incurred on refining price incurred on freight, global crude oil price of Indian basket, etc.
The commission paid by OMCs to the petrol pump dealers is known to be the dealer commission.
The Sales Tax or the Value Added Tax is levied by the State Government on the price of diesel, by adding dealer price, Central Excise Duty and Dealer Commission.