The Centre’s decision to raise petrol and diesel prices by Rs 3 per litre on Friday has once again exposed a familiar pattern in India’s fuel economy: where you live can significantly change what you pay.
As of May 15, Tuesday, petrol in Delhi is retailing at Rs 97.77 per litre. In Kolkata, it has climbed to Rs 108.74. Mumbai is at Rs 106.68, while Chennai stands at Rs 103.67.
The gap is just as visible in diesel prices. Delhi residents are paying Rs 90.67 per litre, compared to Rs 95.13 in Kolkata and Rs 95.25 in Chennai.
At first glance, the difference feels odd. India imports crude oil centrally, state-run oil companies revise prices daily, and petrol quality remains largely uniform across cities. So why does the same litre of fuel cost more depending on the city?
The short answer: taxes; longer answer: state taxes.
The Biggest Difference Is Not Oil — It’s VAT
Fuel prices in India are made up of several layers. There is the base price of fuel, freight charges for transportation, dealer commission, and central excise duty imposed by the Union government.
But after that comes state VAT — and that is where prices begin to diverge sharply.
Unlike GST, petrol and diesel are still outside India’s unified indirect tax system. That means every state government can impose its own Value Added Tax or sales tax on fuel. Some states charge a flat percentage. Others add cess and surcharges on top of it.
Delhi has historically maintained relatively lower VAT rates compared to states like Maharashtra and West Bengal. That is one reason why fuel prices in the national capital are often among the cheapest across major metros.
Kolkata, which on Friday recorded the highest petrol price among the four metros at Rs 108.74 per litre, has long reflected West Bengal’s higher tax burden on fuel. Mumbai’s prices, meanwhile, are pushed up by Maharashtra’s VAT structure and additional levies.
Tamil Nadu follows a different formula altogether, which is why Chennai’s prices land somewhere between Delhi and Mumbai.
The result is that motorists can end up paying nearly Rs 10-11 more for the same litre of petrol simply because they crossed into another state.
