Petrol sold Rs139, diesel Rs116 per litre above basic cost

Consumers continue to bear a substantial burden of taxes, levies and distribution margins on petroleum products, with a significant portion of the prices of petrol and high-speed diesel (HSD)

Consumers continue to bear a substantial burden of taxes, levies and distribution margins on petroleum products, with a significant portion of the prices of petrol and high-speed diesel (HSD) going towards government charges and other components rather than the basic fuel cost.

According to official documents, petrol is currently priced at Rs327.62 per litre, while the basic cost of the product stands at Rs197.69 per litre. This means consumers are paying around Rs130 per litre in the form of petroleum levy, taxes, freight-related charges and margins.

The documents indicate that the government has imposed a petroleum levy of Rs80 per litre on petrol, making it one of the largest components of the additional charges paid by consumers.

In addition to the petroleum levy, petrol carries a climate support levy of Rs5 per litre and customs duty of Rs21.24 per litre. The price also includes an inland freight equalisation margin of Rs7.48 per litre.

Meanwhile, oil marketing companies (OMCs) receive a margin of Rs7.87 per litre, while petroleum dealers are entitled to a margin of Rs8.64 per litre.

Taken together, these taxes, levies, freight charges and commercial margins add a sizeable amount to the underlying cost of petrol, resulting in a significant difference between the basic product cost and the final price paid at filling stations.

Diesel also carries substantial charges

A similar situation is visible in the pricing structure of high-speed diesel. According to the documents, the basic cost of HSD has been calculated at Rs264.76 per litre, whereas its notified consumer price stands at Rs380.86 per litre.

The difference of approximately Rs116 per litre represents taxes, levies and various margins included in the final price of diesel.

The petroleum levy on HSD stands at Rs74.28 per litre, while a climate support levy of Rs5 per litre is also included in the price structure.

Consumers are additionally paying Rs15.68 per litre in customs duty on HSD. The inland freight equalisation margin accounts for another Rs4.63 per litre.

The pricing structure also provides Rs7.87 per litre as the margin for oil marketing companies and Rs8.64 per litre as the dealers’ margin.

The figures highlight the significant role played by government levies and other charges in determining retail petroleum prices. While the basic cost reflects the underlying price of the petroleum product, the final amount paid by consumers also incorporates a range of taxes, levies, freight costs and margins.

The petroleum levy remains one of the most prominent components of the pricing structure for both petrol and diesel. The government uses petroleum-related levies as an important source of revenue, while other components are intended to cover costs associated with transportation, marketing and retail distribution.

The high level of charges has a direct impact on consumers and businesses, particularly because petrol and diesel are widely used for transportation and commercial activities. Changes in fuel prices can also influence the cost of transporting goods and passengers and may eventually affect prices across different sectors of the economy.