How Do IT Companies Handle Petrol Allowances for Personal Vehicles on Duty?

We want to revise our petrol allowance paid to the team traveling locally on official duty. They have their own 2-wheeler/car. Please suggest the prevailing rates (2012-13) paid for 2-wheelers/4-wheelers (considering the cost of vehicle wear and tear as well).

Request urgent help.

Regards,
Gia

When you say "revise," that means you have some rates defined currently. Can you share that? Depending on that, others can comment or suggest.

Thank you.

Currently, we pay Rs. 2 per km for two-wheelers and Rs. 4 per km for cars. This was formulated in 2010. The petrol/diesel prices have shot up tremendously since then; hence, we want to revise the allowances.

Regards,
Gia

As per the petrol hike from 2010 until 2013, we might have to charge ₹15/km, but that is not possible as per policy. Therefore, I suggest revising it to ₹5/km for two-wheelers and ₹8-10/km for four-wheelers.

Thank you.

Hi Mayur, I want to understand how we calculate the per km travel reimbursement. How do we arrive at these figures, as you mentioned Rs. 8-10/km for a 4-wheeler and Rs. 5/km for a 2-wheeler? Could you please shed some light on its derivation?

- Gia

As you mentioned, in 2010, your management paid Rs 2/km for a two-wheeler and Rs 4/km for a car when the petrol price was Rs 55.87/litre [Dec 2010]. Now it's Rs 76.59/litre. The percentage increase over two years has been 37.5%, so the adjusted price would be Rs 2.75 for a two-wheeler and Rs 5.50 for a car. However, I believe this should be finalized with a bilateral agreement between your management and the employees' representative/union. They might also request consideration of the difference in the AICPI, which was 815 in 2010 and is now 969. You should take this into account as well. This is my perspective. Let's wait for more input from senior members.

Please consider the standard average for a two-wheeler as 40 KM/Liter and for a four-wheeler as 12 KM/Liter. If the rate of petrol is 76.80 per liter, then for a two-wheeler:

For 40 KM = 76.80 Rs.
For 1 KM = x
1/40 = x/76.80
= 76.80/40 = Rs. 2 per KM, then no revision is required.

For a four-wheeler:
76.80/12 = Rs. 6.4 per KM
A revision of Rs. 2.4 is required for the four-wheeler.

Calculate as per the above logic.

Hi, please consider the standard average for a 2-wheeler as 40 KM/Liter and for a 4-wheeler as 12 KM/Liter. If the rate of petrol is 76.80 per liter, then for a two-wheeler:

- For 40 KM = 76.80 Rs.
- For 1 KM = x
- 1/40 = x/76.80
- 76.80/40 = Rs. 2 per KM, then no revision required.

For a 4-wheeler petrol:
- 76.80/12 = Rs. 6.4 per KM
- Revision of Rs. 2.4 is required for the 4-wheeler.

Calculate as per the above logic. The logic is very good; calculate accordingly. Here, I would only add the wear and tear of the vehicle, for which you can add 25% to the allowance amount per km.

I checked with my clients to see what they are doing. Most of them are currently giving a vehicle allowance of Rs. 9 to 11 per km for the use of their private vehicles for office work in Mumbai. Vehicle mileage in Mumbai is rarely more than 10 km to a liter. Maintenance cost is generally Rs. 5000 to 8000 per quarter. A small vehicle costs Rs. 5 lakhs and is expected to be used for 80,000 km before being discarded. These factors are generally considered for computing the vehicle allowance.

If the vehicles are being used for a few casual trips, you may simply allow them to claim the relevant cab fare to keep things simple. Another method of determining the increase is to link it to taxi fares. Therefore, if there has been a 50% increase in cab fares, let your allowance increase by 50%.