Indians Pay Over 50% Tax on Fuel, One of the Highest Rates in the World

(Illustration: Mir Suhail)

(Illustration: Mir Suhail)

As on May 21, while the refineries produced petrol at Rs 37.19 a litre, state and central government together made Rs 35.76 for every litre of petrol sold.

New Delhi: India’s soaring fuel prices despite relatively stable crude rates is a direct result of more than 50 percent tax levied on petrol and diesel. After the Centre introduced daily revision of fuel rates from June 16 last year to absorb sudden shocks, retail rates have gone up by Rs 11.09 per litre as on May 21 in New Delhi in less than a year.

As on May 21, while the refineries produced petrol at Rs 37.19 a litre, state and central government together made Rs 35.76 for every litre of petrol sold.

According to the price buildup mechanism used by Indian Oil Corp. Ltd, the price of petrol charged to dealers as on May 21 was Rs 37.19 a litre. The rate finally swells to double its value when 25.44 percent excise duty, 4.72 percent dealer commission and 21.26 percent VAT gets added. The final retail price of Rs 76.57 a litre is a sum of 51.44 percent tax addition.

Petrol price in New Delhi is used for all calculations. However, rates in Mumbai and most other state capitals are predominantly higher as these taxes do not fall under Goods and Services Tax (GST) and are subject to revision by state governments. Retail price of petrol in Mumbai on May 21 reached an all-time high of Rs 84.40 per litre.

The same tax rate when compared to other developed economies and South-Asian countries emerges as one of the highest. The US levies a tax of 17 percent in its fuel while India’s immediate neighbour Pakistan taxes petrol at 23.5 percent.

India’s high tax rate also comes in sharp contrast to Bangladesh and European countries. Sharing Eastern borders with India, Bangladesh levies 25 percent corporate tax along with 15 percent on fuel while the average tax rate on petrol in the European nations approximates to 21 percent.

However, Norway and the Netherlands have tax rates higher than India.

Retail prices of petrol, when compared to its neighbours, topped the charts. Save China which has an average petrol rate of Rs 80.83, India has the highest petrol price in all of South East Asia. Pakistan charges Rs 51.64 a litre for petrol with Bangladesh and Sri Lanka selling a litre of petrol at Rs 71.54 and Rs 63.91 respectively.


Indian petrol is also costlier than Malaysia, Indonesia, the Philippines and Nepal along with 89 other countries.

According to weekly prices of petrol tracked in 167 countries, India ranks 90 with an average price of Rs 78.29 a litre. Iran with huge oil reserves sells petrol domestically at Rs 20.43 a litre. Iceland on the other hand petrol rates hovering around Rs 142.78 a litre.

According to a study by Bloomberg, it takes 20.11% of daily wages in India to afford a litre of petrol. India ranked the worst in terms of affordability of fuel. The study surveyed 60 major economies with Pakistan registering the 59th spot.

Crude prices have forever been blamed for the upward curve of retail prices. Average crude oil prices in the Indian basket during the financial year 2016-17 was USD 46.56 per barrel rising to USD 56.43 a barrel in 2017-18. Rates rose to USD 69.30 per barrel in the month of April 2018. Indian Crude Basket is weighted average of Dubai and Oman (sour) and the Brent Crude (sweet) crude oil prices.

The price hike gains further prominence because India is world’s third largest consumer of oil. In the financial year 2016-17, India consumed 194.2 million tonnes of crude, roughly 5 percent higher than the previous financial year. India has 230 million metric tonnes of refining capacity but imports 78 percent of its fuel needs. India spent $70 billion to import crude oil in the last financial year.

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