We know that the prices of all goods we use in our daily lives keep changing with the price of fuels. Thus, we understand the importance of fuels in our lives. But, this fuel doesn't cost the same in the entire country.
You'll be surprised that Andhra Pradesh pays more fuel prices than Odisha. Yes, both are a part of India, yet this disparity occurs. Why? Let's understand some basic factors behind the same.
Factors leading to increase in fuel prices in Andhra Pradesh
The fuel prices in different states vary because of taxes, government regulations, demographics, and other reasons. Let's quickly explore each of them in detail.
Taxes levied by the State
Apart from the Central government, each state can levy a state tax on fuel. Since Andhra Pradesh and Odisha are different states, the two state governments levy different taxes.
The government of Andhra Pradesh has levied more state taxes on fuel than Odisha. Thus, it increases the fuel price in Andhra Pradesh.
Since VAT (Value Added Tax) also applies to fuel, it's understood that the prices for the same will rise.
Compared to Odisha, Andhra Pradesh has higher VAT on petrol and diesel. Thus, it increases the fuel price in Andhra Pradesh.
Of course, you need to transport fuel from one place to another. And so the transportation cost will also be a major factor when deciding the fuel cost.
There are no major refineries near Andhra Pradesh, unlike Odisha. Thus, the transportation cost increases.
Moreover, the cost of transporting fuel from refineries to retail outlets demand logistic and transportation. So, Andhra Pradesh has to pay a higher retail fuel price.
You can only transport fuel if you have a proper infrastructure set up.
Fortunately, Odisha has a well-developed pipeline. So, it helps to transport the fuel efficiently lowering the transportation costs.
However, Andhra Pradesh does not have such a well-structured pipeline network. Thus, they need more logistics. This way, the transportation cost increases, resulting in a rise in fuel prices here.
Demand and Supply
We know the entire economy depends on two aspects: demand and supply. The same is for fuel.
Andhra Pradesh has more population. It is an urbanized area with a higher fuel consumption rate than Odisha. Thus, we understand that Andhra Pradesh has a higher demand for fuel.
The problem lies with the logistics. It needs more logistics to fulfil the fuel demands. This creates the demand-supply gap. And whenever there's a demand-supply gap, the prices are bound to increase.
Whereas in Odisha, that's not the case. It has a relatively less population, resulting in less demand. Moreover, it has a well-established network set up for transportation, thus meeting the demand-supply gap. This is why the prices do not frequently increase in Odisha.
Of course, the market has multiple suppliers, so the competition is also intense.
Odisha has a higher competitive market because of higher fuel stations. So, every fuel station owner wants to beat the market price because of this competition. They keep their profit levels low and sell the fuel at lower prices.
On the other hand, Andhra Pradesh does not have many fuel stations, so it's a less competitive zone. The fuel station owners know that the people will have to approach them to fulfill their fuel needs. They take advantage of the demand and increase the prices.
Because of all these reasons, Andhra Pradesh has to spend more money on fuel than Odisha.
So far, we understood that only the production of fuel and transporting it across the country doesn't decide the fuel price. Other factors like geography, demographics, and government policies also contribute to the fluctuating fuel price.