Despite the fact that both diesel and petrol are derivatives of the same crude oil, the prices of both commodities vary in India. This is primarily due to the fact that state and federal taxes are levied differently on both products. Even the dealer's commission varies depending on the commodity.
In addition to the basic price of the diesel, other components that would make up diesel price are the central and state government taxes, OMCs and dealer's profit margins and transportation charges.
While the central excise duty is the same across all Indian states, the VAT varies by state. For example, the Delhi government levies 16.75% VAT, whereas Mumbai levies 24%.
It is primarily due to the cost of transportation and the operation of the fuel station. The cost of transportation is lower if the petrol pump is close to the supply plant, so the pump charges a lower rate than other pumps located further away from the supply plant. In addition, the pump's operating costs, such as salaries, rent, and utilities, would influence diesel pricing at each petrol station. There is also a price difference between companies' pumps; for example, HP charges a different rate than its competitors IOCL and BP, and vice versa.
Until October 2014, the Indian government regulated diesel prices. Diesel prices are now directly linked to international crude prices and are thus determined by the respective OMCs. Each OMC charges a different price for diesel based on the transportation and other charges included; it is then up to the dealer to add other costs involved in running the pump as well as supplying the fuel, which eventually adds up to the selling price of diesel.
More than 90% of petrol pumps in India are controlled by three oil marketing companies (OMCs): Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL). The government of India owns the majority of the shares in the three companies. Shell, Reliance, and Essar are among the other private players with a small market share.
When a credit or debit card is swiped, a percentage of the transaction is paid to the card's issuing company as transaction fees. The fee is typically 2-3% of the amount paid by the consumer and is typically absorbed by the merchant or store where the purchase is made. In the case of gasoline transactions, the fee should ideally be borne by the petrol pump dealers. However, because fuel businesses have low-profit margins, the transaction fee is passed on to consumers. As a result, the fee added on top of the actual fuel charge is known as the fuel surcharge. When you use a credit card to buy gas, you will be charged a fuel surcharge as well as the service tax levied on the surcharge.
In order to encourage digital payments following demonetisation, the government waived the fuel surcharge and asked banks to stop charging a surcharge on fuel transactions made with debit cards. According to the Reserve Bank of India's directive, the charge will not be borne by the pump dealers but will be recovered from the OMCs by the card issuing banks.