Sunday, 12 April 2015

Learn How Fuel Cost to Consumer is computed

Apart from reading let us understand how petrol prices are computed.

We keep on hearing changing fuel prices every other day, let’s learn a bit about how these prices are actually computed.

Calculating Crude Oil Cost – Petrol The fuel prices component break up is very simple. The first component is the Crude Oil Cost. In India the prices of petrol are in the range of Rs.5500 – 6000 per barrel as the exchange rate of dollar to rupee is roughly around Rs.54. One barrel of crude oil is equal to 159 liters of Crude oil. The Raw Crude oil in Indian Rupee is equal to Rs.37.50 per liter.

Computing Processing Cost

The crude oil is further processed in refineries in order to convert it into refined fuel. Therefore we add the crude oil cost with its transportation, packing, and freight charges. Approx. Cost of 10 to 12 percent Crude Oil = Rs.4 Adding Transportation, packing, and freight = Rs.3 Final fuel price = Rs.44.50 Calculating Final Price of Fuel Petrol Pump Owner Commission = Rs.1.5 – Rs.2 Excise Duty – Rs.9.5 – Rs.10 VAT implied on Gross Pric Inclusive of Excise Duty (@20%) – Rs.11.2 Fuel’s final price – Rs.67.2

Note: - VAT rates differ from state to state. In Delhi the VAT rate is 20% while the same in Goa is 1%. Some state authorities have also been charging as much as 23% on fuel costs. Fuel Prices Component Break Up Raw crude oil costs – 55% Refining cost – 6% Transportation, dealer commission, and freight – 7.5 – 8 % Taxes – Excise, Cess, VAT, etc. – 30-32%