Govt Cuts Petrol & Diesel Excise Duty Amid Oil Shock; How It Impacts Petrol & Diesel prices in India

For easing the pressure from surging global crude oil prices, the government has slashed excise duty on petrol and diesel, bringing the levy on petrol down from Rs 13 per litre to Rs 3, while completely eliminating excise duty on diesel.

Global energy markets are now seeing massive volatility due to tensions involving Iran and potential disruptions in the Strait of Hormuz which is a critical artery for global oil supply and a major route for India's crude imports.

Excise Duty Cut Amid Global Oil Shock

The sharp reduction in petrol excise duty and diesel excise duty is being taken because of the sharp rise in crude oil prices, which have surged massively over the last few months since late after geopolitical tensions escalated in the Middle East.
The Strait of Hormuz which controls the majority of the world's oil supply flows, has become a big concern for the world. For India, the stakes are particularly high, as nearly 40-50% of its crude oil imports pass through this route. Any disruption in supply has a direct impact on fuel prices in India, making government intervention critical.

Will Petrol Prices and Diesel Prices Actually Fall?

While the excise duty cut on petrol and diesel shows potential relief, it does not automatically translate into an equivalent reduction in petrol price today or diesel price today.

Retail fuel prices in India are influenced by a lot of factors, including global crude oil prices, exchange rates, state-level VAT, dealer commissions, and the pricing strategy of oil marketing companies. In past instances, such duty cuts have not always been fully passed on to consumers immediately.

If crude oil prices remain surged or oil companies are under financial pressure, the benefit of the tax cut may be partially absorbed rather than at fuel stations. On the other hand, if crude prices stabilise and margins improve, consumers could see some reduction in pump prices over time.

Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri In his X post Said, "Government has taken a huge hit on it taxation revenues to ensure very high losses of oil companies (approximately 24 Rs/litre for petrol and 30 Rs/litre for diesel) at this time of sky high international prices are reduced. At the same time, export tax has been levied as international prices of petrol and diesel have skyrocketed and any refinery exporting to foreign nations will have to pay export tax."

Recent Petrol & Diesel Price Hike

Recently, Nayara Energy raised fuel prices due to the strain faced by retailers. The company increased petrol prices by Rs 5 per litre and diesel by Rs 3 per litre, passing on a portion of the higher input costs to consumers.