Retail Gasoline and Diesel Prices in India: Crude Calculations

As the price of crude oil continues to rise, there will be drastic repercussions if the center increases excise taxes without sharing the revenue with the states.

This article is part of the Comprehensive Energy Monitor: India and the World series


Impact of taxes

The retail price of gasoline was INR 101.84 / liter (l) and diesel was INR 89.97 / l in Delhi on August 1, 2021. For gasoline, the base price was INR 41.24 / I, or about 40.4% of the price, the central excise duty was 32.90 INR. / l or 32.3 percent of the retail price and the state value added tax (VAT) was 23.50 INR / l, or about 23 percent of the price. Freight and concessionaire’s commission at INR 4.2 / L was about 4.1% of the retail price. Overall, central and state taxes accounted for around 55.3% of the retail price of gasoline in Delhi. For diesel, the base price was INR 42 / l or 46.7% of retail price, central excise at INR 42.33 / l was around 47% of taxes, state VAT at 13.14 INR / l was around 14.6% of retail prices. The fright and dealer commission was 2.93 INR / l or 3.2% of the retail price. Overall, central and state taxes accounted for around 50 percent of the retail price of diesel in Delhi.

Source: Petroleum Planning and Analysis Unit (PPAC) and Indian Oil Corporation

The share of taxes in the retail price of gasoline in Delhi since March 2014 was lowest in June 2014 at 30.8% and highest at 69.35% in May 2020. Between May 2014 and June 2020, central excise duties on gasoline increased by more than 216% but since then excise duties have fallen slightly by 0.24%. The VAT on gasoline in Delhi increased by more than 33% between May 2014 and May 2020 and by more than 42% since then.

The share of taxes in the retail price of diesel in Delhi was lowest in May 2014 at 18.7% in May 2014 and highest in May 2020 at 69.3%. Central excise duties increased by more than 600% between May 2014 and May 2020 and by more than 3% since then. VAT in Delhi increased by more than 144% between May 2014 and May 2020 and by more than 44%. Although VAT has increased more since May 2020 in Delhi, the increase in excise duties between 2014 and 2020 is much larger.

The center only shares revenue from basic gasoline and diesel excise taxes with the states. Out of the current base gasoline excise duty of INR 1.4 / l, only 42 percent or INR 0.58 / l of the total excise duty of INR 32.9 / l is shared with states. For diesel, only around 0.75 INR / l out of the total excise duty of 42.33 INR / l is shared with the states.

Source: Petroleum Planning and Analysis Unit (PPAC) and Indian Oil Corporation

Impact of crude oil price

In May 2014, when the share of taxes in the retail price of gasoline was lowest, the base price of crude in a liter of gasoline was INR 47.12 / l, or 66% of the price of detail of gasoline. In May-June 2020, when the share of taxes in the retail price of gasoline and diesel was the highest, the base price of crude in a liter of gasoline was INR 18.28 / l, or 25.6% of the retail price of gasoline. Today, the base price of crude oil in a liter of gasoline is INR 41.24 / l, more than 40% of the retail price of gasoline. The base price of crude fell more than 61% between May 2014 and May 2020, but has risen more than 125% since then.

The center only shares revenue from basic gasoline and diesel excise taxes with the states. Out of the current base gasoline excise duty of INR 1.4 / l, only 42 percent or INR 0.58 / l of the total excise duty of INR 32.9 / l is shared with states. For diesel, only around 0.75 INR / l out of the total excise duty of 42.33 INR / l is shared with the states.

The base price of crude in a liter of diesel was INR 44.98 / l or more than 75% of the retail price of diesel in May 2014 (when the tax share was the lowest since 2014) and the price of base of crude in a liter of diesel in As of May 2020, when the tax share was highest, it was INR 18.78 / l, just over 27% of the retail price. Today, the base price of crude in a liter of diesel is INR 42 / l, or 47% of the retail price of diesel. The base price of crude in diesel fell more than 58% between May 2014 and May 2020, but has increased by more than 123% since then.

At present, the price of crude is almost as much as the central excise on a liter of gasoline and diesel.

Impact of the exchange rate

The value of the rupee fell 22% between 2013-14 and 2020-21. During this period, the price of crude (Indian basket) in dollars (and rupees) fell just over 47%, from US $ 105.52 / bbl to US $ 44.82 / bbl. Since April 2021, the price of crude oil (Indian basket) has increased from US $ 63.40 / barrel (b) to US $ 73.54 / b, an increase of more than 15% and the value of the Indian rupee has increased. slightly lowered by just over 1%. Overall, the decline in the value of the rupee since 2014 has had only a marginal effect on the retail price of gasoline and diesel in India.

Source: Petroleum Planning and Analysis Unit (PPAC) and Reserve Bank of India

Crude calculations

Since 2014, the main beneficiary, in terms of revenue from increased taxes on gasoline and diesel fueled by falling crude prices, has been the center. The sharp increase in central excise duties since 2014 has been responsible for most of the increase in the retail price of gasoline and diesel, followed by the increase in VAT. The dramatic drop in crude prices, initially due to the global economic downturn, but later due to the pandemic, paved the way for higher taxes. Since April 2021, this space has been reclaimed by the rise in the price of crude. The centre’s crude calculations to increase the component of excise taxes on gasoline and diesel that is not shared with states could backfire if crude oil prices continue to rise.


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