Here’s An Insight Of Why Petrol Prices Frequently Fluctuate & How Crude Oil Is Imported To Our Country!


Inputs By Rakesh Reddy Dubbudu..

Petrol/Diesel is the common fuel for almost 90% of the transportation in our country. Let it be the day to day vehicles we use or the carriers used to transport goods and services. It is an essential part of the basic infrastructural facility in our country.

But! What is the exact price of Petrol and Diesel? What Is the tax we pay per litre? And Why is there a frequent increase and decrease in these rates? Where do we get our oil from and what is a barrel?


Firstly, neither Petrol nor Diesel is imported to India. We only import “Crude Oil and other petroleum products” which is later refined and made available to the common public as a fuel. Around 65-70% of this oil is imported while 25-30% is produced in India itself. This increases our dependency on other countries which are rich in crude oil resources and thus the international crude oil prices is directly proportional to our fuel prices.

Wait? What? Since we import major reserves from Organization of the Petroleum Exporting Countries(OPEC) Euro-Africa Eurasia nations. Thus the price always is always unstable and may change frequently depending on the market.

But what has this go to do with the taxes? The oil imported is now in the hands of the dealers for nominal price and adding the dealer commission it is supplied to the market. From there the product is supplied to the consumers with other additional taxes like central excised duty and State VAT which put together makes the final price we pay.


For example:
Consider the Crude Oil Price is at nearly 48$ per barrel, and each barrel has 159 litres of oil approximately. Now when the imports are made and another 2$ are additionally added for ocean freight making it 50$ per barrel. Now let the exchange rate of Dollar-Rupee be at 65R(65Rs = 1 $) The cost of a barrel is 50$ and in India rupees, this is 3250Rs per barrel making it Rs 20.440 per litre.

So, the basic cost of oil imported is approximately Rs 20.440 which again is added with entry tax, refinery costs and etc which bring our fuel cost after refining at Rs.30.42 for petrol and 29.98 for diesel (in Delhi) before adding any kind of taxes.


It is estimated that nearly 44-50% of the total price goes to the government in form of the taxes and in The Telugu states, around 35-45% VAT is levied on Petrol, while it is 25% in Diesel.


In the last 3 years, the central government has hugely increased these rates and it has tripled since 2014.

Recently, the government has allowed petroleum companies to regulate prices on a daily basis and the companies started to fix prices according to the international crude oil price. There is dissatisfaction among common people about the daily changing prices and poor regulations on oil companies.




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