Contrary to popular perception of public sector oil firms making huge profits on selling petrol and diesel by gold plating the cost, Indian firms have second lowest refinery and marketing margins - profits - in the world.

Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd on an average earn $18 a barrel refinery and marketing margin on selling petrol, second only to China which allows its oil firms to profit only $12 a barrel, an industry analysis of April prices said.

Oil firms in Japan earn the highest margin of $45 a barrel, while those in freemarket US get $26.

• Special: Oil firms pocket Rs 2 on every litre of petrol, diesel

On diesel, Indian firms earn $15 a barrel, ahead only of their Chinese counterpart who get $10. Japanese get $62 a barrel, while Americans get $19.

"There is no scope for further reduction in the overall refinery and marketing margins. Instead, government taxation, which constitute almost 50 per cent of the retail selling price, should be reduced to contain the effect of high global oil prices on domestic consumers," it said.

Of $135 a barrel retail selling price of petrol in Mumbai, taxes account for $77.

Price of diesel per barrel is $96, of which $39 is taxes.

Besides 10 per cent import duty on crude oil, which makes landed cost of raw material in India highest in the world, on petrol, the government levies 30 per cent excise duty, Rs 1.50 per litre additional excise and Rs 6 per litre surcharge.

On diesel, it charges 14 per cent excise duty and Rs 1.50 per litre additional excise. To add to these rates is the state sales tax which is as high as 33 per cent.

Petrol and diesel prices have remained unchanged for past five months even though the cost of raw material (crude oil) has gone up by over $7 a barrel. The three state-run oil firms together have lost Rs 1,200 crore (Rs 12 billion) on selling the auto fuels below the cost since January.

Based on the spurt, petrol prices in Delhi will have to be raised by Rs 3.53 per litre - from Rs 33.71 to Rs 37.24, and diesel prices by Rs 2.25 per litre - from Rs 21.74 to Rs 23.99 per litre.

"If hike in retail price of petrol and diesel is to be avoided, the government duties and taxes must be cut," the industry study stated.

The study showed that the rise in international crude oil prices escalated the landed cost of crude to $41 a barrel in April, from $33 a barrel in January, 2003.

During this period, refinery and marketing margins on petrol went up by $1 to $18 a barrel but product taxes rose from $65 to $77.

On diesel too the margin rose by a dollar but product taxes jumped from $33 a barrel in January, 2003 to $39 a barrel in April, 2004.

The product taxes do not include 10 per cent customs duty charged on crude oil.

"The landed cost of crude at $41 a barrel in April is the highest in the world, while China with $34 a barrel had the second highest landed cost," it said.