The Indian government has sharply reduced excise duties on petrol and diesel, bringing petrol duty down to ₹3 per litre and fully exempting diesel, in a move aimed at cushioning oil marketing companies (OMCs) from the impact of surging global crude oil prices triggered by the ongoing Middle East crisis. While the immediate impact may be more visible on balance sheets of oil marketing companies (OMC) than retail prices, the move signals a proactive approach to managing the fallout of geopolitical disruptions on India’s energy security.
According to the notification, additional excise duty on motor spirit (petrol) has been capped at ₹3 per litre, while high-speed diesel has effectively been exempted by reducing the duty to nil. The revised rates apply to goods classified under tariff heading 2710.
The notification also clarified that the exemption will not apply to goods meant for export, including shipments by public sector oil companies to neighbouring countries such as Nepal, Bhutan, Bangladesh and Sri Lanka.
The latest revision effectively translates into a reduction of about ₹10/litre in excise duty on both petrol and diesel. Earlier, petrol attracted excise duty of ₹13/litre, while diesel was taxed at ₹10/litre.
The government’s intervention comes at a time when global crude prices have remained volatile due to geopolitical tensions, particularly the US-Israel conflict with Iran and concerns over disruption of supplies through the Strait of Hormuz.
The duty cut is intended to provide relief to public sector OMCs such as Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation (IOC), which have been under financial strain due to elevated crude prices.
OMCs are currently estimated to be incurring losses of around ₹48.8/litre on fuel sales, driven by high international oil prices and controlled domestic retail rates. The excise reduction is expected to help partially offset these losses rather than immediately translate into lower retail prices.
According to Vivek Chaturvedi, chairman of central board of indirect taxes and customs (CBIC), the steps have been taken largely to reduce the under-recoveries for OMCs while ensuring that there is no increase in the prices of petrol and diesel for consumers amid the ongoing crisis.
"Yesterday, we came up with certain export duties in the form of special additional excise duty (SAED). And a road and infrastructure cess… Both these duties have been imposed on the export of diesel and aviation turbine fuel, which has been imported from outside India," he says.
Alongside the excise duty cuts, the government has also extended exemptions on duties applicable to fuel exports and supplies to foreign-going aircraft.
In a separate move, the Union has rescinded a 2022 notification to grant customs duty relief on imported aviation turbine fuel (ATF), aimed at supporting the aviation sector amid rising fuel costs.
Despite the ongoing geopolitical tensions, global oil prices showed some easing on Friday. Brent crude futures declined 2.29% to US$105.53/barrel, while US West Texas Intermediate (WTI) crude fell 2.54% to US$92.08/barrel in early trade.
However, the volatility is likely to persist, given the uncertain geopolitical environment.
Amid concerns over possible fuel shortages, the government has sought to reassure citizens that India’s petroleum supply situation remains stable and well under control.
In a statement, the ministry of petroleum and natural gas (MoPNG) says the country currently has about 74 days of total reserve capacity, with actual stock cover around 60 days, including crude oil, petroleum products and strategic reserves stored in underground caverns.
“We are on the 27th day of the Middle East crisis, yet there is no shortage of petrol, diesel, or LPG anywhere in the country,” the ministry says.
It also dismissed reports of supply disruptions as a “deliberately mischievous, coordinated campaign of misinformation” aimed at creating panic among citizens.
The ministry added that procurement for the next two months has already been secured, ensuring uninterrupted availability of fuel across retail outlets nationwide.
The latest duty cut underscores the government’s attempt to balance fiscal considerations with the need to maintain fuel supply stability and protect consumers from global price shocks.
