Why you end up paying almost double for petrol and diesel

The oil pinch continued on Tuesday that saw both petrol and diesel prices being hiked by 14 paise per litre. In Delhi, a litre of petrol will now cost you Rs 80.87 and diesel Rs 72.97, while in Mumbai petrol and diesel have touched new highs of Rs 88.26 and Rs 77.47 per litre, respectively. But have you ever thought why fuel prices are ‘unreasonably’ high only in India and not in our neighbouring countries?

The taxes that you pay on petrol and diesel nearly double its retail price. As of today, the Indian Oil Corporation, one of the largest oil retailers, charges Rs 39.21 a litre to dealers excluding VAT and excise to dealers but what you end up paying is nearly Rs 80 a litre.

Here’s a break-up of all the taxes and levies that you pay on petrol and diesel:


Excise duty
The excise duty levied on normal petrol is Rs 19.48, while on branded petrol, it is Rs 20.66. For regular high-speed diesel, the excise duty is Rs 15.33, and for branded high-speed diesel, it is Rs 17.69.

VAT
VAT on petrol and diesel varies from state to state. Maharashtra government levies the highest VAT on petrol and diesel at 39.12% and 24.78% respectively in Mumbai, Thane and Navi Mumbai. However, for rest of the Maharashtra, it is 38.11% for petrol and 21.89 for diesel. VAT on petrol is 35.12% in Punjab, 35.77% in Andhra Pradesh and 35.78% in Madhya Pradesh.

Here’s the state-wise list of VAT levied on petrol and diesel

States	Petrol	Diesel
Andhra Pradesh	35.77%	28.08%
Arunachal Pradesh	20.00%	12.50%
Assam	30.90%	22.79%
Bihar	24.71%	18.34%
Chattisgarh	26.87%	25.74%
Delhi	27.00%	17.24%
Goa	16.66%	18.88%
Gujarat	25.45%	25.55%
Haryana	26.25%	17.22%
Himachal Pradesh	24.43%	14.38%
Jammu & Kashmir	27.36%	17.02%
Jharkhand	25.72%	23.21%
Karnataka	30.28%	20.23%
Kerala	30.37%	23.81%
Madhya Pradesh	35.78%	23.22%
Maharashtra – Mumbai, Thane & Navi Mumbai	39.12%	24.78%
Maharashtra (Rest of State)	38.11%	21.89%
Manipur	23.67%	13.97%
Meghalaya	22.44%	13.77%
Mizoram	18.88%	11.54%
Nagaland	23.21%	13.60%
Odisha	24.62%	25.04%
Punjab	35.12%	16.74%
Rajasthan	30.80%	24.09%
Sikkim	27.87%	15.71%
Tamil Nadu	32.16%	24.08%
Telangana	33.31%	26.01%
Tripura	23.15%	16.18%
Uttarakhand	27.15%	16.82%
Uttar Pradesh	26.90%	16.84%
West Bengal	25.25%	17.54%

Union Territories
Andaman & Nicobar Islands	6.00%	6.00%
Chandigarh	19.76%	11.42%
Dadra & Nagar Haveli	20.00%	15.00%
Daman & Diu	20.00%	15.00%
Lakshadweep	-	-
Puducherry	21.15%	17.15%

Notes:
1. For Petrol and Diesel, taxes considered for computing effective tax rate includes Sales tax ,VAT, Cess, Additional tax & Surcharge etc. which are recoverable in price as taxes excluding Central levies & CST.
2. For Petrol and Diesel, in addition to the above taxes, State Government of Bihar and West Bengal, levies additional tax/surcharge on VAT @ 30%/20% respectively which is irrecoverable in nature.
3. Effective rate of tax has been worked out based on the % of total taxes (taxes as per note 1 above) to retail selling prices excluding these total taxes.
4. For Petrol & Diesel, VAT/Sales Tax at applicable rates is also levied on Dealer’s commission in Arunachal Pradesh, Delhi, Gujarat, Haryana, Madhya Pradesh, Punjab, Chandigarh, Puducherry, Andaman & Nikobar, Meghalaya , Dadar Nagar Haveli and Daman & Diu.

Dealer commission
It may be recalled that last year in August, state oil companies had increased the commission for petrol pump dealers by up to 55% under a revised formula that accounts for higher staff wages and, for the first time, the return on investment in land used for the filling station. The commission varies a little with the location of fuel pumps. For petrol, it is between Rs 3 and Rs 3.65 per litre. For diesel, it is between Rs 2 and Rs 2.62 per litre.

Retail price
After adding excise duty, dealer commission and VAT, the retail selling price of the petrol gets nearly doubled.

Recently, the government ruled out excise duty cut on petrol and diesel to cushion the sky-rocekting prices. It believes the current account deficit will overshoot the target and it cannot disturb fiscal math by cutting excise duty on petrol and diesel.

The excise duty on petrol was increased by by Rs 11.77 a litre and that on diesel by 13.47 a litre between November 2014 and January 2016 by the central government. Later, in October last year, excise duty was marginally cut by Rs 2 a litre.

What our neighbours pay for one litre petrol
Pakistan	INR 57.83
Sri Lanka	INR 64.12
Nepal	INR 68.30
Bangladesh	INR 73.06