The Global Trade Research Initiative (GTRI) has proposed a new system for fixing petrol prices in India, calling for a clear and publicly visible formula linked to global and domestic factors.
The proposal, termed the Fuel Price Transparency Framework (FPTF), aims to replace the current pricing system with a structured model that reflects changes in crude oil prices, exchange rates, ethanol blending, refinery costs and taxes. The suggestion comes at a time when Brent crude is trading close to $100 per barrel, raising concerns over possible fuel price increases, Outlook Business reported.
India meets nearly 90 per cent of its crude oil needs through imports, making it vulnerable to global price fluctuations that affect household expenses, government finances and the trade balance.
Under the proposed framework, petrol pricing would follow a four-step process. The first step converts global crude prices into rupee terms based on the prevailing exchange rate. At around $100 per barrel and an exchange rate of ₹93 per dollar, this results in a base cost of about ₹58.5 per litre.
The second step factors in ethanol blending. With India currently blending about 20 per cent ethanol into petrol, the cost rises slightly to nearly ₹58.8 per litre.
The third stage includes refining, transport, marketing and dealer commissions. Oil marketing companies would be allowed a fixed margin of 15 per cent, taking the pre-tax price to around ₹67.6 per litre.
In the final step, taxes are added. Based on current excise duty and state value-added tax levels in Delhi, taxes are estimated at about ₹28.9 per litre, resulting in a retail petrol price of roughly ₹96.5 per litre, which is close to current market rates.
GTRI also examined a scenario of higher crude prices. If Brent crude rises to $120 per barrel and the rupee weakens to ₹95 per dollar, petrol prices could cross ₹110 per litre if tax rates remain unchanged. However, reducing taxes by 10–15 per cent in such a situation could bring prices down to between ₹102 and ₹106 per litre.
The think tank said the aim of the framework is not to artificially control prices but to clearly show how each component contributes to the final retail price. It said greater transparency would help balance the interests of consumers, government revenue and oil companies.
GTRI also pointed out that Brent crude prices have fluctuated widely over the past year, highlighting the need for a predictable and structured pricing system to maintain economic stability and public confidence.
