For every citizen, fuel price is a matter of concern since we all use transportation by some means. The increasing fuel price is an alarming situation. But what takes away the attention is the difference between the fuel price in Andhra Pradesh and Uttar Pradesh.
While both states follow central fuel pricing policies, Andhra Pradesh still pays more than Uttar Pradesh. Is it all because of the state-levied tax, or are there other factors? Let's delve deeper to know.
Factors responsible for the increasing fuel price in Andhra Pradesh
Every state has different taxes, hence, we cannot standardise the price of products for them. Thus, we must study the factors responsible for the fuel price in Andhra Pradesh and Uttar Pradesh.
Tax Structure
Andhra Pradesh has to pay higher fuel prices primarily because of its tax structure.
Andhra Pradesh government levies Value Added Tax (VAT) of 31%, whereas the Uttar Pradesh government charges 19.36% on petrol. This tax is levied after the central government taxes, ultimately leading to a price rise of fuels.
Transportation and Logistics costs
Since we cannot use fuel directly from the refinery, it needs to be transported to the pumps for easy refilling. This adds transportation costs. By this, it is clear that if the distance from the oil depot is more, transportation costs will be higher.
Andhra Pradesh is located far from the major refineries compared to Uttar Pradesh. Thus, the transportation cost is more, resulting in higher fuel prices.
This cost also includes expenses related to freight, handling, and storage. Altogether, these expenses sum up and increase the fuel price to be paid by the consumers.
Demand-Supply Dynamics
We have studied the basic demand-supply theory in economics. As the demand increases, the price also increases. Similarly, fuel prices also depend on its demand.
Andhra Pradesh has a higher population as compared to Uttar Pradesh. This huge population needs fuel to commute. Thus, the demand is also more, leading to the price of fuel.
Andhra Pradesh is also progressing towards industrial development; we know fuel is essential for industries. So again, the fuel prices significantly increase because of this.
On the other hand, Uttar Pradesh has a relatively lower population on a large land area. So, it doesn't require as much fuel as Andhra Pradesh. Since its demands are easily met, there's no demand-supply gap. And so, Uttar Pradesh doesn't have to pay more for fuel.
Competitive Market
Fuel reaches the state through different suppliers and distributors. We know that the market is competitive, and everyone is here to make money. So, when you are in shortage of something, they'll charge more.
Thus, it also depends on the suppliers and distributors you buy the fuel from. Ultimately, prices depend on supply agreements, market shares, and retail networks.
Infrastructure and Operational costs
We also need storage places, pipelines, retail outlets, a workforce, and more for fuel supply. All of these come at a cost. Moreover, these things also require regular maintenance. So, they aren't a one-time cost.
Andhra Pradesh doesn't have a suitable infrastructure of pipelines for easy transportation of fuel. This way, the fuel price increases.
On the other hand, the pipeline network is suitable for fuel transportation in Uttar Pradesh. So, it doesn't have to pay much for fuel.
Apart from these, we find the disparity in fuel prices between the two states because of land prices, electricity costs, and regulatory compliance needs.
Conclusion
We know that these are not the only factors that increase fuel prices. Apart from these, global crude oil prices, currency exchange rates, evolving government policies and many other factors play a crucial role. Understanding these factors is important for us to be alert citizens.
If you want to know more about fuel prices in different states, check out the fuel price page on Park+. Park+ is a one-stop destination for anything related to cars. You can have all the information at your fingertips by downloading the Park+ app. Moreover, you can also learn about different cars, car insurance, challans, parking facilities, car wash, and a lot more through this app. You can also visit the Park+ website to know more about it.