India is the third largest importer of oil in the world. It is facing a growing demand for fuel due to urbanisation and growth in the country's economy. It impacts the fuel prices across different states of India, raising them subsequently.
However, the rate of increase in fuel price is different for different states of India. Andhra Pradesh and Meghalaya are the two states with considerable fuel price differences. While the fuel price in Andhra Pradesh is INR 111.65, it is INR 96.57 in Meghalaya.
Factors affecting the fuel price in Andhra Pradesh
Now you might wonder what creates such a huge difference in fuel prices between the two states. Well, it is due to several factors impacting the fuel prices. So, let us look at what makes the Andhra Pradesh fuel price high compared to Meghalaya.
Taxes and levies
Taxes and levies are the most important factors affecting the fuel prices in a state. Different states in India have different taxes and levies imposed by the state and the central government.
While the central government imposes excise duties on petrol and diesel prices, the state government adds sales tax, additional sales tax, and cess to the same. The state government also imposes VAT (Value Added Tax) on goods and services like fuel.
The taxes imposed by the state government of Andhra Pradesh is higher than that of Meghalaya. Moreover, Andhra Pradesh charges 31% on petrol and 22.5% on diesel, while Meghalaya charges 20% and 12% on petrol and diesel, respectively.
The central government tax is quite similar for all the states of India. Hence, adding all these taxes makes the fuel price in Andhra Pradesh higher than in Meghalaya.
Regulatory policies
The regulatory policies are also different for Andhra Pradesh and Meghalaya. It controls the pricing, distribution, and licensing of fuel. It also impacts the operational fuel costs for retailers and distributors, thus adding it to the retail price of fuel.
The differences in regulatory policies, thus, create a difference in the fuel prices in Andhra Pradesh and Meghalaya regarding operational costs.
Infrastructural differences
The infrastructure of a state determines the ease of transportation of fuel through pipelines�a well-established infrastructure cuts down transportation costs and hence the fuel price.
Meghalaya has a louder say in the case of infrastructure as it has a full-fledged network of pipelines to transport oil from refineries to retail outlets. On the other hand, Andhra Pradesh needs a well-developed pipeline structure, thus making it difficult to transport the fuel. Hence, it is another reason why the fuel price in Andhra Pradesh is high compared to that in Meghalaya.
Market competition
The price competition in the market is another factor to consider while comparing fuel prices. Price competition is due to many petrol pumps, which urges retailers to sell fuel at competitive prices.
This is where Meghalaya benefits. It has more fuel outlets than Andhra Pradesh. It creates more competition in the fuel market, thus making the fuel available at low prices. Andhra Pradesh has fewer petrol pumps, lowering competition and fuel prices.
Demand-supply chain gap
The demand-supply chain is different for Andhra Pradesh and Meghalaya. A gap needs to be more and supply in Andhra Pradesh. It is due to the rising demand for fuel in the state due to high population and urbanisation, while the fuel supply is low.
The case is different for Meghalaya. It has a lower demand for fuel due to its lower population. Hence, the supply is common in Meghalaya. It leads to a higher fuel price in Andhra Pradesh compared to Meghalaya.
Conclusion
Fuel, a scarce commodity, is witnessing a price rise every day. It is mainly true for Andhra Pradesh, among the top three states with the highest fuel prices. However, the fuel price in Meghalaya is lower than in Andhra Pradesh. It is due to various reasons, such as transportation costs, state and central government taxes, market competition, and many other factors, thus answering the difference in fuel prices between the two states.
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