The truth about Fuel Prices

Have you wondered why the the financials of Oil Marketing Companies show profit -

The government and Oil Marketing Companies have taken a great initiative by disclosing the pricing of Petroleum products.

I give below the Price Build up of Petroleum Products

Price Build-up of Diesel at Delhi
Sr. No.	Elements		Unit		Effective 16th Dec'11
1*	FOB Price at Arab Gulf of Gasoil (Diesel)BS III equivalent		$/bbl		127.41
2*	Add: Ocean Freight from AG to Indian Ports		$/bbl		1.69
3	C&F (Cost & Freight) Price		$/bbl		129.10
OR		Rs./Litre		41.69
4*	Import Charges (Insurance/Ocean Loss/ LC Charge/Port Dues)		Rs./Litre		0.39
5*	Customs Duty @2.58% (2.50% + 3% Education cess)		Rs./Litre		1.09
6*	Import Parity Price (at 29.5º C) (Sum of 3 to 5)		Rs./Litre		43.17
7*	Export Parity Price (at 29.5º C)		Rs./Litre		41.15
8*	Trade Parity Price (80% of (6)+20% of (7))		Rs./Litre		42.77
9*	Refinery Transfer Price (RTP) for BS-III Diesel (Price Paid by the Oil Marketing Companies to Refineries)		Rs./Litre		42.77
10	Add: Premium recovered for BS-IV Grade over BS-III		Rs./Litre		0.04
11*	Add : Inland Freight and Delivery Charges		Rs./Litre		0.73
12*	Add : Marketing Cost of OMCs		Rs./Litre		0.65
13*	Add : Marketing Margin of OMCs		Rs./Litre		0.80
14	Total Desired Price (Sum of 9 to 13)-Before Excise Duty, VAT and Dealer Commission		Rs./Litre		44.99
15*	Less: Under-recovery to Oil Marketing Companies		Rs./Litre		11.51
16	Price Charged to Dealers (Depot Price) (14-15)- Excluding Excise Duty & VAT		Rs./Litre		33.47
17*	Add : Specific Excise Duty @ Rs.2.06/Litre (Rs.2.00/Litre+ 3% Education cess)		Rs./Litre		2.06
18*	Add : Dealer Commission		Rs./Litre		0.91
19*	Add : VAT (including VAT on Dealer Commission) applicable for Delhi @ 12.50% and Air Ambience Charges @ Rs.250/KL less rebate of Rs.375/KL.		Rs./Litre		4.46
20	Retail Selling Price at Delhi (Sum of 16 to 19)		Rs./Litre		40.91
*The explanatory notes are given in the attachment
**Fortnightly RTP is weighted average of all Indian Pricing Ports. Element wise explanation of Price Build up of Diesel Sr. No. Elements Description 1 FOB Price FOB (Free on Board) daily quotes of Gasoline at Arab Gulf including premium /discount published by Platts and Argus publications are averaged for previous fortnight. 2 Ocean Freight Ocean freight from Arab Gulf to destination Indian ports as per World Scale freight rate adjusted for AFRA. 4 Import Charges Insurance charges, Ocean Loss, LC Charges & Port dues applicable on import of product. 5 Customs Duty Customs duty on diesel is 2.50% + 3% Education cess. 6 Import Parity Price (IPP) IPP represents the price that importers would pay in case of actual import of Diesel at the respective Indian ports. 7 Export Parity Price (EPP) EPP represents the price which oil companies would realize on export of diesel i.e. FOB price of product (serial no.1) plus Advance License benefit (ALB) (for duty free import of crude oil pursuant to export of refined products). Consequent to abolition of Customs Duty of Crude oil effective 25.06.2011, the ALB is currently NIL. 8 Trade Parity Price (TPP) Trade Parity Price is 80% of IPP & 20% of EPP effective 16.6.2006 as per recommendations of Rangarajan Committee Report. 9 Refinery Transfer Price (RTP) RTP based on Trade Parity Price is the price paid by the Oil Marketing Companies to domestic refineries for purchase of diesel at refinery gate. 11 Inland Freight & Delivery charges It comprises of average freight from ports to inland locations and delivery charges up to Retail Outlet. 12 Marketing Cost Marketing Cost & Margin is as per Marketing Cost Study Report, Nov. 2006 by Cost Accounts Branch,MoF. 13 Marketing Margin 15 Under recovery to OMCs Difference between Desired Price and Actual selling price (excluding Excise Duty, VAT and dealer commission), represents under-recoveries to OMCs. 17 Excise Duty Excise duty on diesel is Rs. 2.00/ Litre as Road Cess + Education Cess @ 3%. 18 Dealer Commission Dealer commission on diesel is Rs.912/KL (effective 01-July-2011) as fixed by MoP&NG. 19 VAT (Sales Tax) VAT at applicable rate in respective State. It varies from state to state. Currently in Delhi, State Taxes on Diesel is VAT @ 12.50% + Air Ambience charges Rs.250/KL less Rebate of Rs.375/KL.

Source:

http://ppac.org.in/uniquepage.asp?id_pk=69 Please visit this link for details about pricing details of other petroleum products.