Petrol Price In Kolhapur
In the recent years, the petrol price in Kolhapur has seen a lot of highs and lows. This is due to various factors involved. A significant component is the price of the crude oil but understand that there are various factors involved in making up the gasoline’s price or making it so unstable.
Before unveiling the factors that affect the petrol prices in Kolhapur, let’s understand its economy and industrial growth.
Kolhapur is one of the historic cities of Maharashtra, which is governed by the KMC (Kolhapur Municipal Corporation). The city is categorized into 5 wards, which are named from A to E. Though the city is well admired for various things, it is popularly known for its “Kolhapuri Chappals,” which are handmade from buffalo leather and dyed further with the help of vegetable dyes.
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Other than this, the city is also known for handicrafts, block printing, beaded jewelry, crafting, silver, wood carving, pottery, brass works, oxidized silver artworks, embroidery designing, lace making, etc. Besides these, Kolhapur is also one of the fastest growing industrial cities with about 300+ foundries manufacturing export goods that are worth 15 billion INR every year. One of the well-known manufacturing plants is KOEL (Kirloskar Oil Engines Limited), which is located near Kolhapur.
What Fuel Pricing System Does Kolhapur Follows?
At present, not only Kolhapur but also every region in India follows the mechanism of “Dynamic Fuel Pricing” system. This was implemented on June 16, 2017 to overcome the drawbacks of the existing pricing system.
Before this pricing methodology came into effect, the fuel rates every updated on the first and sixteenth day of each month. Hence, it was popularly known as the “Fortnight Fuel Pricing” system. The rates were modified fortnight at 8:00 a.m. IST (Indian Standard Time) based on the previous days’ international crude oil rates and a few other factors.
However, this system had a lot of issues. The OMCs (Oil Marketing Companies) incurred various losses, the governments could easily affect or influence the fuel rates, and there was no transparency in the system. To overcome all of these, the “dynamic pricing system” was introduced. This mechanism is something almost all developed nations follow till date.
Factors That Affect Petrol Price In Kolhapur
Ever since the concept of dynamic fuel pricing has been implemented all over India, cost of crude oil in the international market isn’t the only component that affects the petrol rates. When it comes to daily price revision, there are many other aspects involved too. Let’s comprehend each in detail.
1. Price Of The Crude Oil
The daily price revision of fuel might not always correspond to the modification directly in the international crude oil rates on the previous day or on that particular day. Say, for instance, if the petrol rate in Delhi dropped down by 5% within 10 days and diesel rates by 4.5%, then there are hardly any changes in the overall price of the crude oil in India. It should have plummeted by a minute 0.4 – 0.5%.
2. INR (Indian Rupee)
Indian Rupee is an important factor for the fuel rates to see some fluctuations. It determines the everyday retail price of fuel that are set by the OMCs (Oil Marketing Companies). A vital aspect that comes to play here is the CER (Currency Exchange Rate) or rupee-dollar exchange rate.
The oil companies in India import crude oil that is quoted in U.S. dollars. However, it eventually incurs the expenses in Indian rupees. Therefore, even the crude oil rates decline and simultaneously, the rupee also weakens in comparison to the dollar, it might offset the possible profits to the oil refineries.
In addition, if the rupee strengthens with weakening crude oil, it augments the gains for the oil refineries and marketing companies.
Tax is certainly one of the important factors that determines the final retail price for any region in India. These are set up based on the state and central government policies.
Besides the above, logistics is a vital factor for retail pricing of petrol and diesel. Fuel that is transported to regions or cities with long distances, especially that are farther from depots are typically priced higher when compared to locations that are close to the storage areas of oil companies. Generally, the fuel prices not only frequently differ from one town to the other but also between dealers by a few paises. However, this variation becomes huge when it comes to metro cities.
5. Increase In Demand
The demand for fuel is much higher in developing nations like India and China. This is due to its economic growth and population. Basically, industrial production and fast economic growth improve the demand for petroleum products.
According to the United States Energy Information Administration, consumption of oil in OECD (Organization for Economic Cooperation and Development) countries decreased from the year 2000 to 2010. However, oil consumption in the non-OECD countries steadily inclined by 40+%. When it comes to oil consumption, Saudi Arabia, India, and China featured the biggest growth amongst the non-OECD countries in this period.
In fact, China had surpassed United States as the biggest oil importer. Together with non-OECD countries, China also plays an important role in dictating the crude oil’s demand.
What Impacts The Fuel Rates In Kolhapur?
The three important aspects that impact the fuel prices in Kolhapur are as follows:
- The market rate of unrefined oil
- CER – Currency Exchange Rate
The cost of crude oil has inclined to 65 USD per barrel in April 2018. However, if you take the price data one year back, it was much lower. In fact, it was so low that it doesn’t even come close to the current market price. A year back, one barrel was just 4 USD. This, in turn, has surged the price too high in the recent months.
Rupee-dollar rate is yet another vital factor that acts as an influencer. The variation in dollar rate and Indian rupee plays a key role in the global market price of crude oil.
Does GST Have Any Effect On The Petrol Rates In Kolhapur?
GST (Goods and Service Tax), a multi-phased tax scheme, has not yet been forced in India’s any of the oil sectors. Even if a commodity like fuel comes under the GST program, the big players might be overburdened. Besides this, the government might also have its revenue affected largely. The compliance cost will increase too. Whether GST will be imposed on fuel is still a big question. Even if there are plans, it will certainly take time.
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