Indians pay 35% more for petrol than consumers in Pakistan

It is no secret that petrol and diesel in India are heavily taxed. But how much more (or less) do Indians pay when it comes to buying a litre of fuel? We compared the average price paid by people in the neighbouring countries and found that a consumer in India spends as much as 35 per cent more on petrol than consumers in Pakistan.

The cost of one litre of petrol in Pakistan was 87.7 Pakistani Rupee. When you convert the same to INR, it comes to Rs 51.61. When one compares this to the average price of petrol in India as on May 21, which comes at around Rs 80.22, according too GlobalPetrolPrices.com, the consumers in India pay 35.66 per cent extra for petrol as compared to people in Pakistan.

In Sri Lanka, despite a massive price hike earlier this month, consumers pay around 20 per cent less for petrol as opposed to consumers in India. The petrol in the island nation is currently retailing at 148 Sri Lankan Rupee, which comes around Rs 63.90. And the difference in case of diesel, is even more huge. In terms of Indian rupee, a Sri Lankan shells out Rs 47.06 for a litre of diesel.

While cheaper fuel in Pakistan and Afghanistan makes sense because of their proximity to oil-producing nations, but India's retail fuel rates even trump that of our landlocked neighbour Nepal. In terms of Indian rupees, the price of petrol and diesel in the rugged Himalayan state is Rs 68.76 and Rs 57.51 respectively.

However, China is the only neighbouring country where petrol prices are marginally higher than India. A litre of gasoline in China costs 7.57 Chinese Renminbi, which is equivalent to Rs 80.78. Similarly, diesel costs Rs 72.14 per litre in the Asian giant.

Petrol and diesel prices in India have gone through the roof soon after the Karnataka assembly elections. The fuel prices are unlikely to ease further as global crude oil prices are hovering around $80 a barrel.

It seems the only viable option before the government to bring some relief for the consumers is to cut the central excise duty which has been hiked nine times between November 2014 and January 2016. Currently, petrol is taxed at a little over 100 per cent and for diesel the taxes come at around 66.48 per cent. These taxes include central excise duty and VAT.

Interestingly, while the retail prices have gone up, the price at which the fuel is sold to petrol pump dealers has come down drastically since 2013. The price of petrol charged to dealers during FY2014 was Rs 47.18 per litre, way more than the current charge of Rs 37.19. The retail fuel price includes the base price, dealers' commission of around Rs 3.60 and the rest is central and state levies.

According to the finance ministry's revenue collection estimates, the central government expects to collect more than Rs 2.579 lakh crore by levying taxes on the petroleum products by the end of this fiscal. This is a massive jump from the gross revenue collection of around Rs 88,600 crore in 2013/14, in the last fiscal the collection was Rs 2.016 lakh crore.

While tax levies on fuel have stabilised government's coffers at a time when GST collections have been lukewarm, a consistent higher cost of fuel is likely to drive up inflation, which in turn may lead to higher interest rates, stalling private investments. Australian brokerage Macquarie has already said that the uptick in fuel prices may force Reserve Bank of India to hike rates by 0.25 per cent in the August policy review.

Excise duty on petrol was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre ever since Prime Minister Narendra Modi-led BJP government came to power in 2014. After moving to daily revision of fuel prices in June last year, the government had cut basic excise duty on petrol and diesel by Rs 2 per litre in October last year.