Where Can You Find The Cheapest Petrol In India And Why Fuel Prices Vary From State To State?

Petrol prices in India continue to vary widely from region to region, with the Andaman and Nicobar Islands recording some of the lowest rates, while metro cities like Mumbai remain significantly costlier. This sharp price gap, despite being within the same country, has raised questions among consumers. Here’s a closer look at why fuel prices differ so much across states.

It is often assumed that petrol and diesel prices should be uniform nationwide, but the reality is quite different. In fact, the Andaman and Nicobar Islands offer some of the lowest fuel prices in India. Here, petrol costs approximately Rs 82.46 per litre, while diesel is priced at around Rs 78.05 per litre. The primary reason for this is the relatively low local taxation in the Union Territory, along with an efficient supply system.

Similarly, regions such as Daman and Diu, and Dadra and Nagar Haveli, also enjoy comparatively lower fuel prices, with petrol costing around Rs 92 to Rs 93 per litre. In some northeastern states like Arunachal Pradesh and Uttarakhand, fuel prices are considered more affordable for the general public when compared to several other parts of the country.

There are three key reasons behind the variation in petrol prices across states. The first and most significant factor is Value Added Tax (VAT). Since petrol and diesel are not yet included under the Goods and Services Tax (GST) framework, individual state governments impose VAT based on their economic policies. In some states, VAT ranges between 15% and 20%, while in others it can go as high as 35%.

The second major factor is transportation and freight cost. Fuel must be transported from refineries to various parts of the country. Delivering fuel to regions located far from refineries or to hilly terrains involves higher logistical expenses. Ultimately, these additional costs are passed on to consumers.

The third factor is the dealer commission and additional cess imposed by governments. Petrol pump owners receive a fixed commission per litre, which may vary slightly from state to state. Moreover, some state governments levy additional charges such as pollution cess, road development tax, or social welfare cess. All these components combined contribute to the final retail price, making petrol more expensive in certain regions.