• Source:JND

Petrol, Diesel Price Hike: The Centre’s latest hike of Rs 3 per litre in petrol and diesel prices on Friday has once again put the spotlight on a question many Indians ask every day at fuel stations, why does petrol cost so much more in some cities than others?

Take Delhi, for example. On May 15, petrol in the national capital is selling at Rs 97.77 per litre. But in Kolkata, and the price jumps to Rs 108.74. In Mumbai, petrol costs Rs 106.68, while Chennai residents are paying Rs 103.67 per litre.

Diesel tells a similar story. Delhiites are paying Rs 90.67 per litre, while prices have crossed Rs 95 in cities like Kolkata and Chennai.

The difference may not make sense at first. After all, India imports crude oil centrally, oil companies revise prices daily, and fuel quality is nearly the same across the country. So why are people in some cities paying almost Rs 10 more for the same litre of petrol? Let's find out.

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Why Fuel Costs More In Chennai, Mumbai And Kolkata

The answer lies largely in taxes especially those imposed by state governments. Fuel prices in India are not decided by crude oil prices alone. Every litre includes the base fuel price, freight charges, dealer commission, and excise duty charged by the Centre. On top of that, state governments add their own Value Added Tax (VAT), and this is where the prices begin to vary sharply.

Unlike many other goods, petrol and diesel are still outside the GST system. This gives states the freedom to impose different tax rates, cess, and surcharges.

Delhi has generally kept VAT on fuel lower than states like Maharashtra and West Bengal. That is why fuel prices in the capital are often among the cheapest compared to other metro cities.

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Mumbai’s fuel prices are pushed higher because of Maharashtra’s additional levies and VAT structure. Kolkata, meanwhile, continues to reflect West Bengal’s relatively high taxes on petrol and diesel. Tamil Nadu uses a different tax formula, placing Chennai somewhere in between.

As a result, consumers can end up paying nearly Rs 10-11 more for the same litre of petrol simply because they are in a different state.

Transportation and logistics costs also play a minor role. Petrol and diesel are moved from refineries and depots through pipelines, tankers, and distribution networks before reaching retail outlets. Cities located farther from supply hubs may see slightly higher transportation charges built into retail prices.

However, taxation remains the dominant factor. In some cases, even geographically remote locations like Port Blair have recorded lower fuel prices than several mainland cities because local taxes there are comparatively lower.

This also explains why fuel prices can change sharply at state borders despite very little distance being covered.

 


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