Petrol Prices in
Bhubaneshwar is an ancient city replete with beautiful historic temples which attract pilgrims and tourists from all over the country. It is the capital of Odisha whose history dates back to over 2000 years. It is more than a city adorned with temples.Petrol prices differ within Indian states due to factors like political health of the region, transportation expenses, tax regulations.Petrol and diesel prices are revised daily at morning 6 am, after the introduction of new pricing model of Dynamic Pricing. The system was mainly implemented to bring more transparency to the system and to prevent the governments from affecting or influencing the OMCs (Oil Marketing Companies).
Computation of Petrol Prices in
Factors such as movement of the currency and fall in the rupee against the dollar is taken into consideration while calculating the price of petrol. The actual price of Petrol in India is calculated based on factors like:
- Delivery price at refinery
- Brent’s crude daily price
How actual prices of Petrol is Calculated
- Convert US Dollar to Indian Rupee
- Divide the rupee by the number of litres of oil
Now what happens after buying the cruid oil from foreign suppliers?
After buying the crude oil from foreign suppliers, it is transported to various refineries in India. It is then separated into different products such as diesel, petrol, coal tar and more in the distillation towers of the 20 refineries in India.
Key Factors that affect petrol prices in
The petrol prices in Bhubaneshwar is rising due to the increase in the dollar value, charges of import and export of petrol, increase in the number of vehicles every day. The prime reason for the hike in petrol price is that it is traded in USD. The price of fuel also increases due to the state and central taxes levied on it.
Components of petrol prices in India
So here goes the analysis on how the computation of oil prices is done and what are the components considered. At the end the consumers bear the final cost which includes:
- Sales VAT – 17%
- Custom Duty – 4%
- Dealer Commission – 2%
- Excise Duty – 25%
- Fuel Component – 52%
Refinery Transfer Price (RTP)
It is the cost incurred by OMCs to convert crude oil into refined petrol. RTP is the fee charged by refineries to OMCs to convert oil into refined petrol.
Cost of Crude Oil plus Freight Charges
India is one of the biggest importers of crude oil. The oil manufacturing companies pay crude oil prices in addition to the cost and freight charges to buy oil from overseas companies.
Central and State Taxes
State and Central Government impose tax on petrol. Across the nation, the central excise duty is the same across the nation while the component of VAT varies within the states.
The petrol dealers add their commission per litre of petrol and sell it to the end customers.
OMCs profit margin
Till the refining is done OMCs retain the possession of oil and they sell refined petrol after adding a profit margin.
Petrol Pricing in India
The Indian government introduced a new pricing method as a pilot project on May 1, 2017 in five cities, namely Pondicherry, Visakhapatnam, Udaipur, Jamshedpur, and Chandigarh. After the massive success, finally on June 16, 2017, dynamic pricing model was implemented all across the country. Under this scheme, fuel prices get revised based on the global crude oil prices and foreign exchange rates.
For the last two decades, countries like United States of America (USA), Australia, Japan, and Germany are following the dynamic fuel pricing method. Earlier, the Oil Marketing Companies used to revise their fuel prices on the 1st and 16th of every month. However, after introducing a new pricing model, fuel prices are revised every morning at 6 am.
The reason behind shifting from the Administrative Price Mechanism (APM) to dynamic pricing was to pass on the benefits to customers occurred after the global price changes.
How Fuel Industry in India Works
Companies involved in oil exploration and production extract oil in the form of crude oil. Oil exploration companies in India only fulfil 25% of the country’s oil needs. Hence, the major part of the fuel is imported in India. Oil marketing companies (OMCs) including PSUs and private companies, manage oil’s journey from crude to refined oil. Oil marketing companies pay transportation charges, freight, and crude oil prices to get crude oil. Then, OMCs pay a refinery transfer price to transform crude oil into petrol and pay excise duty before selling it to dealers. The final price of the petrol, including the dealer’s commission and taxes, is charged from the customer.
The major players in the Indian production and exploration industry are public sector companies (PSCs). Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) hold 70% of the total market, while private corporations control the remaining 30% segment.
The prominent players of this industry include Indian Oil Corporation, Bharat Petroleum Corporation, Oil and Natural Gas Corporation, Hindustan Petroleum Corporation, Reliance Industries, Petronet LNG, Adani Gas, Bharat Petroleum Corporation, Gas Authority of India Limited, Essar Oil, and BP.
Computation of Petrol Prices in India
From the price of crude oil to the final petrol prices, many factors affect the calculation of petrol prices. OMCs pay dollars to buy crude oil and send it to oil refineries. Then, it pays freight charges and refinery charges before delivering it to the dealers. Further, dealers are charged with state and central taxes. At the end, the consumers bear the final cost, including the dealer’s commission.
Components of Petrol price
- Sales VAT–17%
- Custom Duty–4%
- Dealer Commission–2%
- Excise Duty - 25%
- Fuel Component–52%