Petrol Price in Salem
Petrol price in Salem, the sixth largest city in South Indian state of Tamil Nadu, is made of various components, both domestic and international. Petrol price in Salem is updated on a daily basis with respect to international crude oil prices in the global market. Just like gold price, any slight change in the international crude oil price would impact petrol price in Salem.
Another important factor that affects the petrol rate in Salem on a daily basis is the currency exchange rate. Apart from these, there are some domestic factors that contribute to the ever-increasing fuel prices in the country.
Explained below are all the factors that contribute to petrol price in Salem.
Components of Petrol Pricing in Salem
Petrol price in Salem, just like in any other Indian city, is composed of various elements. While a few are domestic in nature like the state and central government taxes, dealers commission, oil companies profit margins, international elements are global crude oil price and US dollar to the Indian rupee exchange rate. Let’s look at each of the factors in detail to understand how petrol is priced in Salem.
- Domestic Factors that Affect Petrol Price in Salem: Domestic factors are the costs related to petrol refining, transportation and fuel station maintenance within the country. India imports over 70% of its fuel requirement from other countries. The imported fuel will be in crude form, hence should be refined to produce fuel products such as petrol, diesel, etc.
Except for the purchase of crude oil, the rest of the oil processing, which is termed as downstream oil production, happens in India. Listed below are various domestic factors that affect the petrol price in Salem.
- Excise duty levied by central government
- Value added tax levied by Tamil Nadu government
- Profit margins of Indian oil marketing companies (OMCs)
- Petrol dealers commission
Excise Duty on Petrol in Salem: The Indian government charges excise duty on petrol and other petroleum products. The tax will be same across all Indian states and will be levied on every litre of petrol sold in the country. The excise duty on petrol is, however, not a factor that varies on daily basis. Hence, it will not affect the petrol price in Salem every day. However, whenever there is a revision in excise duty, petrol prices in Salem, just like in any other Indian city, either increase or decrease, based on the revision.
The latest revision of excise duty on petrol was made in February 2018, during which the centre announced a Rs.2 reduction in the excise duty on both petrol and diesel.
Value-added Tax on Petrol in Salem: After the centre’s share of taxes, it’s state governments turn to charge value-added tax on each litre of petrol sold in their respective state. With regards to Salem, Tamil Nadu government charges 32.06% valued added tax (VAT) on petrol. Similar to excise duty, the state tax may not impact petrol price in Salem on a daily basis. However, whenever there is an upward or downward revision of VAT, the petrol rate in Salem will be adjusted accordingly.
Costs to Oil Companies: Another domestic factor that affects petrol price in Salem is the profit margins of oil marketing companies (OMCs). Currently, there are three state-owned OMCs operating in India namely Indian Oil Corporation (IOCL), Hindustan Petroleum (HP), and Bharat Petroleum (BP).
These companies purchase oil from international companies in crude form and conduct the refining and supply activities within the country. All the costs incurred for refining, transporting and marketing petrol within the country will thus be added to the cost price of crude oil along with their profit margins. Hence the costs of OMCs along with their profit margins constitute a share in petrol price in Salem. However, they won’t affect the petrol price on a daily basis.
Dealers Commission on Petrol in Salem: The last domestic component that is a part of petrol pricing in Salem is the dealers commission. The petrol pump dealers purchase the refined crude oil, either petrol or diesel, from the OMCs. They will then add their commission, which includes the transportation cost of petrol from the refinery to the fuel stations, employee wages, pump maintenance, etc., to the cost price of petrol. The dealers commission is typically decided by the OMCs and will be revised once every year. Hence, it also does not impact the petrol price in Salem on a daily basis.
International Factors that affect Petrol Price in Salem: Besides the domestic factors there are two main international factors that affect the price of petrol in Salem on a daily basis.
- Crude oil price in international market
- US dollar to Indian rupee exchange rate
Crude oil price: As mentioned earlier, more than 70% of Indian fuel requirements, especially petrol and diesel, are imported from other countries. Indian oil companies purchase fuel in crude form from different oil producing nations. Further, with the implementation of dynamic fuel pricing in India, oil prices in the country have been aligned with the international crude oil prices. Hence, any slight change in the international crude oil price of Indian basket will impact the petrol price in Salem along with other Indian cities.
For instance, petrol price in Salem today will be calculated by considering the yesterday’s international crude oil price of Indian basket. The Petroleum Planning and Analysis Cell (PPAC) is an authorised body to compute petrol prices on a daily basis by considering the international crude oil price.
The revised petrol price will be updated by 6 a.m. every day at every petrol station in Salem.
Currency exchange rate: Oil trading typically happens in US dollars across the globe. Hence, the dynamic nature of US dollar impacts the petrol price in Salem on a day to day basis. The stronger the dollar is on a particular day, the higher will be the petrol price in India the following day.
Breakdown of Petrol Price in Salem, Tamil Nadu
Using the factors listed above, let’s see how the petrol rate in Salem on 17th April 2018 was calculated.
|1||International crude oil price along with ocean freight charges||$77.82 per barrel = Rs.31.84/Litre (considering $1=65.07 and 1 barrel oil = 159 litres)|
|2||Oil company’s margin, transportation, refining and freight cost||Rs.3.31/Ltr|
|5||Value added tax (VAT)||Rs.18.60/Ltr|
|Total||Retail selling price of petrol at Salem||Rs.76.79/Ltr|
Frequently asked questions (FAQs) on Petrol Price in Salem
- Why does petrol price in Salem change every day?
Ever since the dynamic fuel pricing model is implemented in India, petrol price in Salem changes on a daily basis. The new fuel pricing mechanism revises the petrol prices in Salem every day as opposed to previously implemented fortnightly based price revision. The price of petrol will be revised by considering previous day’s international crude oil price and currency exchange rate. The revised price will be updated at all the petrol pumps in Salem at 6 a.m. every day.
- Why are petrol prices in Salem higher compared to petrol prices in some north Indian states?
An important factor that affects petrol price in Salem is the value-added tax (VAT) charged by Tamil Nadu government. As the VAT charged by Tamil Nadu state on petrol is higher compared to some north Indian states, petrol price in Salem is slightly higher compared to north Indian states or cities including Jharkhand, Chattisgarh, Delhi, Uttar Pradesh, Haryana, etc.
- Where would I get the cheapest petrol in Salem?
Petrol price across the city of Salem remains the same except for a few minute differences. The state-owned fuel stations including Indian Oil, Hindustan Petroleum, and Bharat Petroleum offer best petrol price in Salem compared to private counterparts like Essar. Among the public sector players, Indian Oil offers the cheapest petrol in Salem, whereas BPCL offers the highest.
Also Check Petrol Price in NearBy Cities of Salem
|Petrol Price in Coimbatore||Petrol Price in Bangalore||Petrol Price in Chennai|
|Petrol Price in Trichy||Petrol Price in Mysore||Petrol Price in Pondicherry|
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