How Petrol costs Rs. 79? :Petrol Price Hike in India

     UPA Government, on completion of second season's 3 years, increased petrol prices by over 10% that of original prices as return gift. Just after the hike, all news channel started bombarding on government taking feedback from Aam adami. But very few of them tried to justify the truth. The truth is worth than expected and it clearly reveals the fact that how our the Governments (both central and state) splurge on populist policies with an aim of making every citizen a beggar.

Why Petrol @ Rs.79?

1. Let us take today's exchange rate of Rs. 56 per US Dollar. This is not healthy rate for Indian economy.

2. Cost of Crude oil is 100 US Dollar per barrel. (It is to be noted that price of crude oil has recently reduced from 120 USD to 100 USD)

3. One barrel approximately produces 159 litres of petrol or equivalent. (calculated by industrial exports)

4. Above calculations leads to Rs. 5600 per barrel. (In August 2008, this price was upto Rs. 5900 per barrel. Today, we get crude oil 6% cheaper than August 2008)

5. Cost for converting Crude oil to Petrol is USD 12, which comes to Rs. 672 per barrel. (This conversion includes transport of crude and refined products, cost of refining, reasonable refining margin for the refinery, fuel used by the refinery machines, commission of dealers, etc.) 

6. Final cost of Petrol at your nearest petrol pump comes to Rs. 42 per litre! Simple formula for calculating this is: Total cost of making Petrol per barrel / No. of litres consisting in one barrel. i.e. in our case; 5600+672/150= Rs. 42 per litre

Why Petrol price is more than Rs. 42 per litre?

     Answer for this is GOVERNMENT TAXES!! Yes, Government charges almost 85% taxes on Petrol.  This include Basic Excise duty, Additional Duty, Special Additional duty, Cess, Additional Cess and lastly, the exorbitant State Sales Tax – adding up to Rs. 35-40 per litre of Petrol.

Why government not reducing prices?

     You readers are wise to think on this question. Government is not ready to take any economical responsibility. They pass all such things on masses and collect taxes to spend their expenses. If you are more interested on this topic, click here to read post by CRI.

     If they decide, they can bring Petrol prices down to Rs. 55-60 per litre. Best example for this can be Government of Goa. In March 2012, the Chief Minister of Goa, Mr. Manohar Parrikar, has announced a reduction of Rs. 11 per litre of petrol!