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Why Petrol Prices Are So High In India?

Do you also wonder why in this world, petrol prices are so much higher in India compared to most of the countries on our planet? Do you know the fundamentals of how much petrol actually costs and how much we Indians pay for it? Why is there such a huge difference in the price of diesel and petrol in India while it cost almost the same globally? In this article, I will try to answer some of these questions by discussing the various tax components involved in the price of Petrol and Diesel.

petrol price in india

The answer to all these question is there is HEFTY tax on petrol in India as compared to the tax on Diesel in India. As per the current prices in Delhi on 9th Nov 2011, there is about 38% Tax on petrol price while there is 18% tax on Diesel. This tax is the combines tax of center and state government.

Lets see how Petrol Prices Reach Rs. 68.64 per litre in India?

Below table shows the break of taxes, excise duties, cess and other levies on petrol prices in Delhi, India. It also shows how diesel is so affordable (relatively) at at price of Rs. 41.29 in Delhi while the petrol more like an elitist fuel in India.

Description Petrol
(Rs per Litre)
(Rs. Per Litre)
A Basic Price of Petrol / Diesel without taxes and refining margins 41.38 33.63
B Custom Duty On Petrol / Diesel (2.5% of A for petrol, 2.25 % for Diesel) 1.04 0.76
C Central Govt. CENVANT Duty (Central Value Added Tax) 6.35 2.06
D Central Govt. Special Excise Duty 6.00 NIL
E Central Govt. Additional Excise Duty Towards Highway Cess 2.00 NIL
F Education Cess of 3% on CENVANT Duty + Special Excise Duty + Highway Cell (3% of C+D+E) 0.43 NIL
G Total Central Taxes 15.82 2.82
H Petrol / Diesel Price With Central Taxes (A+G) 57.20 36.45
I State Govt. VAT in Delhi, 20% of Petrol Price With Central Taxes (20 % of H for Petrol) Discounted Rate For Diesel 11.44 4.84
J Total Central Taxes + State Taxes on Petrol (G+I) 27.26 7.66
K Total Retail Price Of Petrol Basic Price + Central Duties and Taxes+ State Taxes (A+J) 68.64 41.29

So now you know how much of money you pay for petrol goes to the government, its about 38% of the basic price whereas in case of diesel its less than 20%. This is too much tax as there is tax involved at multiple levels on petrol. There is a huge scope for tax cuts to provide some relief in the prices of petrol in India. It depends on the economics, fiscal deficits, financial outlook and political will of the Government to reduce these taxes for petrol to make petrol prices more affordable for common people in India.

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data source – taxguru

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