Prices of petrol and diesel

Subject: Economy

Context: Prices of petrol and diesel have remained unchanged for 24 days now, even though Brent price has dropped below $70 barrel

Concept:

Increase will not benefit the Centre much because the excise duty on petrol and diesel is a specific tax, charged on the number of units sold.
Most States however calculate sales tax/VAT on petrol and diesel on ad valorem basis, based on the sale value (however some goes for specific duty structure), thus gaining from the increase in the prices. Ex- Rajasthan, Telangana, Karnataka and Madhya Pradesh

Pricing in India

The pricing of petrol and diesel in India is based on the sour grade (Oman and Dubai average) and sweet grade (Brent Dated) crude oil processed in Indian refineries in the ratio of 75.62: 24.38
The basic sic value of crude accounts for around 36 per cent of the final cost of petrol (in Delhi). Freight charges and dealer commissions account for around 4 per cent. The remaining 60 per cent of the retail price of petrol and 54 per cent of diesel goes to the Centre and States as taxes.
The basic excise duty is ₹ 1.40, special additional excise duty ₹ 11, agriculture, infrastructure and development cess ₹50 and additional excise duty (road and infrastructure cess) ₹18.
The excise duty and cess on diesel are also similarly linked to the quantity sold and not the value. While this helps the Centre protect its revenue in periods when crude oil prices decline, it caps the income when prices increase.