Diesel Price In Coimbatore
The diesel price in Coimbatore has been seeing ups and lows based on the international fuel trends and of course, the recently implemented mechanism of “dynamic fuel pricing.” To make you comprehend better, this article gives a better insight of diesel pricing and the various factors affecting it, especially in a region like Coimbatore.
But before that here is a quick introduction to Coimbatore.
Coimbatore is not only an important city in the state of Tamil Nadu but also the Manchester of southern India. It is one of the popular cities that features a major business and commercial hub. In fact, it is a high revenue yielding region and is way ahead of Chennai. This makes Coimbatore one of the fastest developing metropolitan cities in India.
Coimbatore features many trade associations such as COINDIA, COJEWEL, and CODISSIA (Coimbatore District Small Industries Association), which represent many industries within the city. It also boasts a 160,000 sq.ft fair ground for trade, which was built back in the year 1999 and was named as COINTEC because it hosts Small Industries Exhibitions.
|Also Know: Diesel Price in Tamil Nadu|
How Are Diesel Rates Decided In India?
Let’s assume that the diesel is imported by Indian Oil Corporation (IOC) from an oil refinery based in Saudi Arabia. Now, the price at which the diesel is bought is known as the “FOB (Free On Board) Price.” In short, this is exactly the amount which IOC pays to the firm and have it delivered to any closest international port.
The diesel will then be sent through ships from there to the mentioned Indian port. This requires a charge to be paid to the transporter and is known as the “Ocean Freight Charge.” This Ocean Freight Charge is added to the FOB charge to get a new or revised charge, which is called the “C&F Charge – Cost and Freight Charge.”
Therefore, C&F Cost = FOB Charge + Ocean Freight Charge
When the diesel reaches the respective Indian port, an “import charge” is imposed, which comprises of three charge categories:
- Port Dues: The fee paid for utilizing the port facilities.
- Insurance Charges: The premium that is paid to the insurance company to cover for the crude.
- Ocean Losses: The fee paid to recompense for the lost oil at the time of transportation.
The Indian Government imposes a tax on the crude oil that has just been imported, which is officially termed as “Customs Duty.” This is usually the 2.5% of the C&F price. Say, for example, if IOC buys crude oil at a C&F cost of Rs.100 for a liter, then the tax will be Rs.2.5 for a liter.
When the customs duty, import charges, and C&F price are added, the resultant is a crucial term known as IPP (Import Parity Price).
Therefore, IPP = C&F Cost + Custom Duty + Import Charge
Another term, which is worth mentioning is none other than EPP (Export Parity Price). It is a theoretical term that is equivalent to the FOB cost. Talking about India, the average of EPP and IPP is used – together which is known as TPP (Trade Parity Price). The formula to calculate TPP is:
TPP = IPP × 0.8 + EPP × 0.2
Once the refinery processes the crude into diesel/petrol/kerosene, a price has been calculated, which is known as RTP (Refinery Transfer Price). This is the price that OMCs (Oil Marketing Companies) pay to the refinery while purchasing the diesel if it is equivalent to TPP. In short, RTP = TTP.
The refined petroleum product is then transported via road or rail to various retail outlets and for this, an Inland Freight Charge is paid. On the other hand, the OMCs spend separately for marketing and when this is included, TDP (Total Desired Price) is achieved.
Therefore, TDP = Inland Freight Charge + RTP + Marketing Cost
However, the Oil Marketing Companies sell their diesel to retail outlets for a price that is lesser than TDP, which is otherwise termed as Deport Price.
When the diesel reaches the retail outlet, the Central Government then imposes another “excise duty” and the State Government imposes VAT (Value Added Tax) for a profit margin (fixed) per liter. Finally, the retail price of diesel per liter is calculated.
Factors That Affect Diesel Price In Coimbatore
Diesel rates are affected by multiple factors and not just one. These are as follows:
1. The Cost Of Crude Oil
A vital factor that determines the diesel rates in Indian market is the price of the international crude oil. On the other hand, increased international demands, low production levels, and political disruptions in crude oil manufacturing countries are few other reasons that influence the fuel price greatly.
2. Increase In The Demand
Faster economic development in India and other parts of Asia are important reasons for the demand to rise drastically. This also results in a price hike in the fuel.
3. Imbalance In The Demand-Supply Chain
Most Indian oil firms face the issue of meeting the diesel requirements when there is an increased need and this is usually due to a shortage in the production as well as supply from the respective refineries.
The tax imposed on petroleum products vary from one country to the other based on the taxes imposed by the local government. Talking about India in specific, when the Indian Government increases the tax on fuels, the Oil Marketing Companies (OMCs) have no other alternative than to incline.
What Is Dynamic Fuel Pricing?
Before the concept of Dynamic Fuel Pricing came into the picture, the state-run oil marketing companies used to update the new fuel prices at the first and sixteenth day of every month. In short, it was updated fortnightly and thus, it was called “fortnight fuel pricing system.”
This had a lot of drawbacks and sometimes, there were heavy losses too. To cope up with it and to bring in transparency in the system, the concept of “dynamic fuel pricing” was introduced and implemented on June 16, 2017.
This mechanism is something that most developed countries follow and when it was introduced in India, it was truly a big hype. According to the dynamic mechanism, the fuel prices are updated every morning at 6:00 a.m. at IST (Indian Standard Time).
Is The Mechanism Of Dynamic Fuel Pricing Implemented In Coimbatore?
Yes. In fact, every region in India now follows the system of dynamic fuel pricing.
Is GST Included For Diesel Rates In Coimbatore?
No. As of now, GST is not included for diesel in India because that not only requires time but also approval from both Central and State Government.
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