Diesel Price In Gulbarga
The diesel price in Gulbarga has seen a lot of fluctuations in the recent years. The fuel rates in India are determined by keeping multiple factors in mind. While crude oil plays a key role in this, this isn’t the only factor. There are many other factors involved too. Before we get into detail, let’s first understand the economy of Gulbarga.
Economy Of Gulbarga
Officially known as the Kalaburagi district, Gulbarga is one amongst the thirty districts of Karnataka. Its economy is majorly dependent on agriculture. In fact, about 75% of its population depends on agriculture. It brings a huge income and contributes 45% of the district’s total revenue.
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Like other regions in India, Gulbarga depends upon rainfall. Also, irrigation development in the recent years has paved new ways for many farmers. The district features two rivers, which are Bheema and Krishna. However, they still have to depend on other irrigational sources.
Oil Marketing Companies In India
India has three major OMCs (Oil Marketing Companies), which are:
- IOCL (Indian Oil Corporation Limited)
- HPCL (Hindustan Petroleum Corporation Limited)
- BPCL (Bharat Petroleum Corporation Limited)
Besides marketing, these OMCs (Oil Marketing Companies) not only refine oil but also market after buying from oil manufacturing companies like Oil India, ONGC (Oil and Natural Gas Corporation Limited), Cairn India, Reliance Industries, etc. Their buying price is associated directly with the international crude price. Therefore, low prices are positive for the OMCs.
The revenues of oil marketing companies will progress if oil rates continue to plunge because this results in:
- Reduction in the purchase cost of crude oil
- Improvement in the refining margins
- Progress in the marketing margins
It is also vital to understand that the oil marketing companies do not have complete freedom in deciding the selling price of fuel. However, they are forced to sell them at a discount.
Factors That Affect The Diesel Price In Gulbarga
The retail cost for one gallon of diesel reflects the overall profits and costs of manufacturing and delivering it to the consumers. Though there are multiple factors that affect the diesel rates in India, the four major components include:
- Cost of the crude oil that a refinery purchases
- Refining cost and profit
- Marketing, distribution, and pump cost as well as profit
- Tax (set by the local government, state government, county, and federal)
All these aspects affect the retail cost of diesel but they vary not only over time but also by the geographical location of the place where it is sold.
1. Cost Of Crude Oil
The cost of crude oil is one of the biggest and crucial components in determining the retail price of diesel. Global supply and demand help in determining the price of crude oil. In addition, global economic circumstances contribute in the supply-demand cycle for petroleum products that are produced using crude oil. Since diesel is a key fuel in the field of transportation, the demand usually follows the economic trends.
2. Rise In Demand
Generally, whenever there is a demand for a commodity, the price of it automatically inclines. This applies to fuel too. When there is a rise in demand, it has a direct impact on its retail price. Countries like India and China depend heavily on distillate fuel, particularly diesel. Europe and Asia use nearly half of the distillate fuel in the world.
Therefore, they are one of the largest contributors to the global distillate demand. This, in turn, increases the demand and continues as economies continue to expand. As said, when there is an increased demand, the price also increases.
3. Unevenness In The Demand-Supply Chain
Transportation prices in India are usually more volatile when compared to the prices of any other commodities. Therefore, the vehicle fleet in India is almost entirely dependent on fuel. If the supply of petroleum products declines unpredictably, either due to lagging imports or refinery issues, diesel inventories (or stocks) might decline quickly.
When inventories are falling and low, some marketers and wholesalers might bid high for the accessible supplies. In addition, if the transportation system of fuel cannot fulfill the fuel needs on time, especially from location to another quickly, the retail price continues to be comparatively high. However, such fluctuations in the price fluctuations are normal. In fact, they are not only experienced by the fuel market but also in all commodities.
4. Seasonal Demand
Even though the demand for diesel in India is consistent and normally reflects its economy, the prices frequently fluctuate throughout the year. However, it sees a surge during some seasons, which is particularly during winter and summer because these are times when people go on vacations. This, in turn, pressurizes the diesel market.
5. Transportation Cost
Transportation cost inclines depending on the distance from the supply source and retail location. Regions that are far from the Gulf Coasts tend to have high diesel prices than others that are near.
6. Regional Operating Cost And Domestic Competition
Besides transportation, diesel’s cost also reflects the domestic market conditions and the geographical location of a place. Refiners operate and own a few retail outlets whereas other retail pumps are independent traders who buy diesel for a wholesale price.
Moreover, the cost to do a business can differ prominently based on where the dealers are situated. These costs generally include salaries, benefits, wages, lease/rent, equipment, overhead, state fees, local fees, taxes, and insurance. The retail stations close to each other have different costs, supply source, and traffic patterns. The location and number of domestic competitors also have an impact on the retail price of diesel.
What Fuel Pricing System does Gulbarga Follow?
Gulbarga now follows the mechanism of “dynamic fuel pricing.” It was implemented on June 16, 2017, and according to this system, the prices are updated every morning at 6:00 a.m. IST (Indian Standard Time) based on the following:
- CER – Currency Exchange Rate
- International Crude Oil Prices
This method has not only brought a huge change in the fuel pricing system in India but has also prevented the government from affecting or influencing the prices to the OMCs (Oil Marketing Companies).
Does GST Have any Influence On The Fuel Rates Of Gulbarga?
Currently, GST does not have any influence on the fuel rates of Gulbarga. Since the implementation of GST (Goods and Service Tax) in India is a long-term process, deciding about it will require the governments to make proper planning.
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