Petroleum products are used as raw materials in various sectors and industries such as transport and petrochemicals. These products may also be used in factories to operate machinery or generators. Any fluctuation in the price of petrol and diesel impacts the production and transport costs of various items. When compared to other neighbouring countries, India has the highest prices for petrol and diesel.

Breakup of fuel prices

There are two main reasons behind the fuel price rise. International market has reduced fuel production and manufacturing countries are producing less fuel to gain more profit. This is making the consumer countries suffer.In April last year, India had supported the decision of the major oil-producing countries to cut production as there was a sharp fall in demand amid Covid-19 pandemic.

The frequent hike in excise duty by the Centre and sales tax by the state governments are said to be the main reasons for the high fuel prices in India.The Goods and Services Tax (GST) was introduced to usher in uniform tax across the country. But since fuel does not fall under the ambit of the GST, customers end up paying a high price for petrol and diesel.

If petrol is put even under the highest 28% slab of the GST, then the total taxes on the fuel will be 50%, considering the 22% cess that is applicable on it. This would mean the retail price of petrol would be only about Rs 37, considering that it costs about Rs 23 per litre when it reaches a petrol pump.But, now, not only is fuel kept out of the GST, customers are also not getting the benefit of low oil prices in the international markets.

State Tax as per different States

This is how the price of petrol goes up and ends up pinching the retail customer. Dealer commission: Rs 3.60; central taxes: Rs 32.98; and state taxes: Rs 22-28 depending upon state to state. In other words, the taxes are about 227% of the actual cost of petrol. At the end Consumer ends up paying Rs91.

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