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Petrol price is now a big hit in India

Published On: 21 June, 2021

Petrol or petroleum, whatever you say, it will cost you almost like gold now in India. Since COVID 19, India's petrol price hike never stopped. All around the nation, specially the metro cities, petrol costs above Rs. 95 a litre and in Mumbai, its over Rs. 100 a litre thats a record in the history of petrol rates. Comparing to countries like US, price rate of petrol in INR is ~ 57, and in Saudi Arabia, its just Rs. 46 per litre, the cheapest in the world, where as here its almost twice. So, why is petrol so costly in India? Before we get to know about this, lets first know about petroleum oil.

Petrol or Petroleum (/pəˈtroʊliəm/), also known as crude oil and oil, is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth's surface. It is commonly refined into various types of fuels. Components of petroleum are separated using a technique called fractional distillation, i.e. separation of a liquid mixture into fractions differing in boiling point by means of distillation, typically using a fractionating column. It consists of naturally occurring hydrocarbons of various molecular weights and may contain miscellaneous organic compounds. The name petroleum covers both naturally occurring unprocessed crude oil and petroleum products that are made up of refined crude oil. A fossil fuel, petroleum is formed when large quantities of dead organisms, mostly zooplankton and algae, are buried underneath sedimentary rock and subjected to both intense heat and pressure.

Petroleum has mostly been recovered by oil drilling. Drilling is carried out after studies of structural geology, sedimentary basin analysis, and reservoir characterisation. Recent improvements to technologies have also led to exploitation of other unconventional reserves such as oil sands and oil shale. Once extracted, oil is refined and separated, most easily by distillation, into numerous products for direct use or use in manufacturing, such as gasoline (petrol), diesel and kerosene to asphalt and chemical reagents used to make plastics, pesticides and pharmaceuticals. Petroleum is used in manufacturing a wide variety of materials, and it is estimated that the world consumes about 100 million barrels each day. Petroleum production can be extremely profitable and was important for economic development in the 20th century, with some countries, so called "oil states", gaining significant economic and international power because of their control of oil production. (Source Wikipedia)

Source: BusinessToday

Why petrol is costly in India?

1) Crude Price: The original price of the petrol when imported.  

2) High Tax burden: Base Price + Central Tax + State Tax + Dealer's Commision = Petrol Price

In May, 2021, the breakup of the petrol price in Kolkata is shared below.

Base Price: Rs. 34.19

Central Government Tax (Includes Transportation): Rs. 32.9

State Government Tax (Includes Transportation): Rs. 21.36

Dealer's Commision (Includes salary of fuel station staffs): Rs.3.77

Total Petrol Price: Rs. 92.58

3) India is the highest petrol spending country with over ~95 INR.

If government decreases the tax amount, the petrol price can easily go down to 75 INR to 80 INR.