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Petrol, diesel costliest in Bangalore
June, 05th 2008

The steep hike in petrol and diesel prices has made the precious fuel dearer in India's IT hub, with retail prices being the costliest in the country.

Heavy taxes levied by central and state governments have led the state-run oil marketing firms to increase the price of petrol in Bangalore by Rs.5.61 per litre to Rs.58.50 from Rs.52.89 and diesel by Rs.3.36 per litre to Rs.39.80 from Rs.36.44.

In contrast, post-hike a litre of petrol costs Rs.50.56 in New Delhi, Rs.55.88 in Mumbai, Rs.54.29 in Kolkata and Rs.55.07 in Chennai.

Similarly, diesel is cheaper in New Delhi at Rs.34.80 a litre, Rs.39.54 in Mumbai, Rs.37.17 in Kolkata and Rs.37.73 in Chennai.

"About 59 percent of the retail price in Bangalore and Karnataka are central and state levies in the form of sales tax, entry tax, excise duty and cess, making the cost of petrol highest in the country," a top official of state-run Indian Oil Corporation (IOC) told IANS.

In the case of diesel, 37 percent of the retail price in Bangalore are central and state levies.

Though the government increased the cost of petrol by Rs.5 (11 percent) and diesel by Rs.3 (8.5 percent) Wednesday, the retail price in Bangalore has gone up by an extra 61 paise for petrol and 36 paise for diesel due to levies on the basic price.

The levies include a whopping sales tax of 28 percent on petrol and 20 percent on diesel imposed by the state government across Karnataka. In addition, an entry tax of five percent on petrol and diesel is levied on the basic price plus sales tax.

"But the basic price of petrol itself includes 23 percent excise duty and three percent cess on it, while the maximum retail price (MRP) includes freight cost and dealer's commission," the official said.

As a result, a litre of petrol in Bangalore at Rs.58.50 includes excise duty plus cess amounting to Rs.13.75. Similarly, a litre of diesel in the city at Rs 39.80 includes excise duty plus cess to the tune of Rs.3.71.

"Retail pricing of petrol and diesel is a very complicated process, as the basic price includes refining cost, customs duty on import of crude, landing cost, etc. For instance, a one percent reduction in excise duty, as made by the government, has brought down the central levy to Rs.13,350 per kilolitre from Rs.14,350. Cess of three percent on reduced excise is about Rs.400.

"Similarly, a one percent reduction in excise duty on diesel has brought down the central levy to Rs.3,600 per kilolitre from Rs.4,600. Cess of three percent on reduced excise is Rs.108," the official said.

In tandem with its dubious reputation as a city of traffic jams, the consumption of petrol and diesel in Bangalore has shot up by 25-30 percent in the last six months. As a result, 15,000 kilolitres of diesel and 13,000 kilolitres of petrol are sold across the city per month by IOC, Hindustan Petroleum (HP) and Bharat Petroleum (BP).

The soaring crude prices have forced private firms such as Reliance and Shell to shut their refilling outlets in the city as their retail prices did not have any subsidy from the government.

State-run oil firms IOC, HP and BP do not have a refinery in Karnataka. They transport the fuels in tankers by rail and road from Chennai, about 350 km from Bangalore.

Though Mangalore Refinery and Petrochemical Ltd (MRPL) of the Oil and Natural Gas Corporation Ltd (ONGC) is located on the west coastal town, about 350 km from here, its products are not sold in Bangalore since it does not have retail outlets.

As market leader, IOC accounts for about 50-55 percent of the total sales per month in Bangalore and Karnataka.

New Chief Minister B.S. Yeddyurappa has ruled out slashing sales tax and entry tax on petroleum products in the state to cushion the impact of the steep hike, saying the state had not resorted to any fresh impost in the last budget, which he presented as finance minister in the previous coalition government.

He declined to react to the appeal made by central Petroleum Minister Murali Deora to the states to reduce sales tax and entry tax on petrol and diesel to reduce the burden of higher fuel prices on consumers.

Expressing shock over the price hike, Yeddyurappa told reporters here Wednesday that as the common man was already reeling under runaway food price hikes and soaring inflation, the central government should have further subsidised petroleum products instead of increasing their prices.

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