Abstract: The given research study examines the relationship between the cost components of retail petrol prices, such as crude oil, ethanol procurement price, price charged to dealers, and taxes levied by the government in India. The given research study compares the two time periods from 2013-14 to 2016-17 and 2021-22 to 2024-25, when ethanol blending with the petrol was minimal and when ethanol blending with the petrol was substantial. Secondary sources of data are utilized from the official websites of respected ministries, OMCs, and international organizations such as MoPNG (Ministry of Petroleum and Natural Gas), NITI Aayog, Reserve Bank of India, IOC (Indian Oil Corporation), PPAC (Petroleum Planning and Analysis Cell), BPCL (Bharat Petroleum Corporation Limited), HPCL (Hindustan Petroleum Corporation Limited), World Bank, and International Energy Agency (IEA). The findings revealed that during the period from 2013-14 to 2016-17 crude oil prices sharply declined but the reduction in petrol price was very low and at the same time government levied higher taxes in the form of VAT and Excise duty on petrol which absorbed the benefit of low price of crude oil that can be passed to the consumer. In contrast, while crude oil prices increased from 2021-22 to 2024-25, prices charged to dealers and the price of petrol decreased, while the ethanol procurement prices also increased from ₹52.92/L to ₹71.86/L, indicating that using ethanol may decrease the price of petrol, but the benefit is not passed to the customer, as it is absorbed through higher government taxes. The findings suggest that a more accurate assessment of the impact of ethanol blending on petrol prices would require detailed data on all cost components included before the price charged to dealers. Availability of such data would allow the individual contribution of ethanol procurement and blending to be separated from other components of petrol pricing and would therefore provide a more accurate estimate of its effect on the final petrol price.

Keywords: Cost Components of Petrol; Crude Oil Price; Ethanol Blending Policy; Ethanol Price; Ethanol Procurement Price; Excise Duty; Fuel Policy; Government Ethanol Policy; India; Petrol Price; VAT.