- Petrol and diesel prices have increased four times in 11 days across India
- Petrol prices exceed Rs 100 per litre in all four metro cities with regional differences
- State VAT rates cause petrol and diesel price variations from 20% to over 31%
Fuel Price Hike: Petrol and diesel prices have now been hiked four times in just 11 days. The latest increase has pushed petrol prices above the Rs 100-mark in all four metro cities.
But while everyone is paying more, not everyone is paying the same.
In Kolkata, one litre of petrol now costs Rs 113.51. In Delhi, it is still around Rs 102.12. Mumbai residents are paying Rs 111.21, while Chennai consumers are getting petrol at Rs 107.77.
Similarly, Delhi pays Rs 95.20 for one litre of diesel, but Kolkata pays Rs 99.82. In Mumbai, diesel costs Rs 97.83 per litre, but in Chennai, the rate is Rs 99.55.
This difference may look small on paper. But for daily commuters, cab drivers, transporters and businesses, it adds up fast every time the tank is filled.
So why does the same litre of petrol (and diesel) cost Rs 10-12 more in one state than another?
The answer lies largely in taxes. More specifically, Value Added Tax (VAT).
Fuel Price Hike: The VAT Factor
Unlike most goods and services in India, petrol and diesel are still outside the Goods and Services Tax (GST) regime. That means every state is free to impose its own VAT rates and cesses on fuel. The Centre levies excise duty uniformly, but states decide how much extra tax consumers pay locally.
Abhishek Bhilwaria, AMFI-registered mutual fund distributor, explained that this autonomy is the biggest reason behind the wide gap in fuel prices across India.
"As petroleum remains outside the unified GST framework, state governments retain full autonomy over their Value Added Tax (VAT) structures, which currently range from 20 per cent to over 31 per cent. Consequently, final pump prices vary drastically across state lines, driven primarily by each region's specific fiscal deficit requirements, localised inland freight costs, and the compounding effect of ad-valorem taxes stacked alongside localised infrastructure and welfare cesses," he said.
In simple terms, states that need more revenue often keep fuel taxes higher because petrol and diesel remain one of the easiest and most reliable sources of tax collection.
And fuel taxation is not always straightforward.
Some states levy a pure percentage-based VAT. Others use a mix of percentage tax and fixed charges per litre. Several states also impose road development cess, infrastructure cess, or additional surcharges.
Take Telangana, for example. The state imposes 35.2 per cent VAT on petrol and 27 per cent on diesel, making it among the highest fuel-taxing states in the country. Andhra Pradesh follows a layered structure with 31 per cent VAT on petrol along with an additional Rs 4 per litre VAT and Rs 1 road development cess.
That is why states like Andhra Pradesh, Telangana, Kerala and Madhya Pradesh routinely feature among the costliest places to buy petrol in India.
States With Highest Petrol-Diesel Prices
According to the latest available state-wise data, some of the highest petrol prices (per litre) are currently seen in:
- Andhra Pradesh: Rs 117.09
- Telangana: Rs 117.15
- Keralam: Rs 114.48
- Madhya Pradesh: Rs 116.02
- West Bengal: Rs 114.01
Meanwhile, states such as Delhi, Gujarat, Uttar Pradesh, Haryana and Uttarakhand remain relatively cheaper due to lower VAT structures.
The Petroleum Planning and Analysis Cell (PPAC), under the oil ministry, also shows major variations in state-level VAT structures. While some states charge under 15 per cent, others impose effective tax burdens exceeding 30 per cent along with fixed levies.
Freight costs also matter.
Fuel transported farther inland becomes more expensive because of logistics and transportation charges. Dealer commissions differ slightly too. Together, these costs widen the final retail gap between cities and states.
For industries that consume large amounts of fuel, these differences directly hit profitability.
Rishabh Jain, Director - International Business at Petros Stone LLP, said uneven VAT rates are making operations more expensive for fuel-intensive businesses.
"The wide variation in VAT rates across Indian states creates an uneven playing field for fuel-intensive industries such as granite quarrying and stone manufacturing. Since states determine VAT independently based on local revenue needs, infrastructure spending, and subsidy obligations, fuel prices differ significantly across regions. For granite exporters operating quarries in multiple states, this directly impacts operational costs and complicates pricing for international clients," he said.
"A more rationalised and standardised VAT framework on industrial fuel would help improve cost efficiency and strengthen the global competitiveness of Indian granite exports," he added.
'Fuel Price Rise Among Lowest Globally'
The latest fuel hikes themselves are linked to the global crude oil rally triggered by the Iran war and disruptions near the Strait of Hormuz. Indian oil retailers have raised prices repeatedly this month as under-recoveries widened.
Despite the recent hikes, however, government sources argue that India's increase remains relatively modest compared to several global markets facing the same oil shock.
Globally, petrol prices now average around Rs 130 per litre, with several European countries crossing Rs 180. In contrast, India's price levels remain among the lowest for non-subsidised economies.
