Fuel is one of the many necessities of urban life. But it is a scarce resource. This is why the rising fuel demand is leading to a rise in its prices. However, the rate of increase is not constant throughout the world. The same is true for India. Different Indian states have different fuel prices, which are changing every day at different rates.
Andhra Pradesh is among the top three states with the highest fuel prices. It surpasses many other states, including Jharkhand, in fuel prices. While the fuel price in Jharkhand is INR 100.66, it has risen to INR 111.65 in Andhra Pradesh.
Factors that affect the fuel prices in Andhra Pradesh and Jharkhand
Various reasons govern the difference in fuel prices. Many reasons affect the fuel prices of different states. Hence, let us find out how this holds for Andhra Pradesh and Jharkhand and why Andhra Pradesh has high fuel prices compared to Jharkhand.
1. State and central taxes
Central and state governments impose taxes on goods and services. Fuel is considered one of the most basic amenities and is liable to taxes. There are various taxes that central and state governments impose on fuel prices, such as Excise duty, sales tax, advanced sales tax, cess, etc.
The taxes levied by the state and central governments are also among the most prevailing reasons for the higher fuel price in Andhra Pradesh than in Jharkhand. The state government of Andhra Pradesh has the criteria of imposing high taxes on fuel, which is greater than the state government of Jharkhand. This makes the retail price of fuel higher in Andhra Pradesh compared to Jharkhand.
VAT is an indirect tax that the state government imposes on goods and services. VAT is also applicable for fuel and determines its market price. The VAT rate on fuel prices for Andhra Pradesh is 31.40% and 22.25% on petrol and diesel, respectively. However, Jharkhand's VAT rate on fuel prices is 27.45% and 23.33% on petrol and diesel, respectively.
On average, the VAT adds to the fuel prices of Andhra Pradesh, making it higher than Jharkhand.
3. Differences in infrastructure
The transportation cost of fuel is also a factor that affects its price. The transportation cost depends on the pipeline structure for transporting the fuel, which relies on the infrastructure of different states.
Jharkhand has a full-fledged pipeline structure for transporting fuel, while Andhra Pradesh still needs more extensive pipelines. Hence, fuel transportation is effective for the former, thus lowering its transportation cost. Hence, with a low transportation cost, the fuel price in Jharkhand stays below Andhra Pradesh.
4. Demand-supply gap
Demand-supply dynamics play a major role in deciding the price of fuel. As we all know, the fuel demand is higher in Andhra Pradesh due to its increased population and urbanisation, as compared to Jharkhand.
The higher fuel consumption in Andhra Pradesh creates a higher demand than in Jharkhand. But the lower fuel supply in the former state creates a huge demand-supply gap. This goes on to affect the fuel price to a great extent, thus putting it on a hike in Andhra Pradesh.
5. Transportation costs
As mentioned earlier, the transportation cost of fuel also impacts its market price. The transportation cost depends on the transportation of crude oil from refineries. It is quite clear from the geographical location of Andhra Pradesh that it is far away from oil refineries, thus adding to the transportation cost of fuel.
On the other hand, Jharkhand is close to many oil refineries, getting the upper hand in transportation. Hence, the transportation and logistic costs justify why the fuel price in Andhra Pradesh is higher than that in Jharkhand.
Andhra Pradesh stays at the top of the table when it comes to fuel prices in different states of India. The fuel price in Andhra Pradesh is also higher than in Jharkhand and many other states. Various reasons explain the difference, with Jharkhand having many advantages.
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