Pragmatic | Petrol and diesel pricing

The breakdown of prices and VAT rates.

There is a lot of confusion about the breakdown of petrol and diesel pricing in India. Here are the components of the final price that we pay for petrol and diesel at the point of sale. This comes from the Union Minister of Petroleum and Natural Gas in his statement to the Rajya Sabha. The prices are for sale at Delhi.

The price of petrol and diesel in various states in India varies due to the differing rates of Value Added Tax (VAT) levied in different states. The VAT on petrol varies from 15 % to 33 % across states while it ranges from 9.08 % to 26 % across different states in India.

Here are the rates of VAT across various states in India (as of October 2010):

As these VAT rates are ad valorem, most of the states would be pleased with the rising crude oil prices. Higher prices means greater revenue for the state governments. Moreover, revenue accruing fromVAT constitutes a substantial amount of the states’ total revenue from own resources, as high as one-third of the total revenue. For instance, in 2011-12, petrol and diesel account for nearly 33% (Rs.8,670 crore) of the total VAT income in Gujarat.

As the the exact figures for subsidies, central collections and states’ collection are not available, it is not possible to ascertain whether the government is a net loser or a gainer with its subsidy bills and tax collections on fuel.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.