Petrol Prices, Diesel Prices In India Today: Will Fuel Prices Fall After Excise Duty Cut On Petrol & Diesel?

Petrol and diesel prices are in focus as the crude oil price remains elevated with no signs of easing in the Middle East conflict. Following the urgent need to calm oil and gas supply crunch, the Indian government on Friday reduced excise duties on fuel. The excise duty is reduced by Rs 10 per litre on fuel products, which brings tax on petrol to Rs 3 per litre and zero duty on diesel. This brings the hope of whether fuel prices will fall further. But will it?

Petrol, Diesel Excise Duty Cut:

Excise duty in petrol is trimmed by Rs 10 per litre to Rs 3 per litre, a sharp decline.

Meanwhile, excise duty on diesel is also cut by Rs 10 per litre, which makes the tax rate to zero for this fuel product.

The latest cut comes after Nayara Energy hikd petrol and diesel prices by Rs 5.3 and Rs 3 per litre. Nayara is India's largest private sector fuel retailer with market share of 8.4%. It is also backed by company's like Rosneft and Kesani.

Petrol Prices In India Today:

City	Price	Price Change
New Delhi	₹ 94.77	0
Kolkata	₹ 105.41	0
Mumbai	₹ 103.54	0
Chennai	₹ 101.23	+0.17
Gurgaon	₹ 95.36	0
Noida	₹ 94.74	-0.11
Bangalore	₹ 102.96	+0.04
Bhubaneswar	₹ 100.94	-0.22
Chandigarh	₹ 94.30	0
Hyderabad	₹ 107.50	0
Jaipur	₹ 104.72	0
Lucknow	₹ 94.69	-0.15
Patna	₹ 105.54	0
Thiruvananthapuram	₹ 107.48	+0.18

Diesel Prices In India Today:

City	Price (per Litre)	Price Change
Thiruvananthapuram	₹96.48	+0.30
Hyderabad	₹95.70	0
Chennai	₹92.81	+0.20
Bhubaneswar	₹92.52	-0.22
Kolkata	₹92.02	0
Patna	₹91.78	0
Bangalore	₹90.99	0
Mumbai	₹90.03	0
Jaipur	₹90.21	0
Gurgaon	₹87.83	0
Noida	₹87.81	-0.17
Lucknow	₹87.81	-0.17
New Delhi	₹87.67	0
Chandigarh	₹82.45	0

Will Petrol & Diesel Prices Fall In India?

As per reports, the excise duty cut is more of a relief to oil marketing companies (OMCs) rather than to end consumers. The duty cut is aimed to cushion OMCs who are vulnerable to the US-Israel war with Iran, which has halted operations of oil and gas at Strait of Hormuz, a key passage for India's crude needs. Due to the Middle East conflict of March, crude oil prices have gained nearly 50% and traded around $110 per barrel, which is expected to hit OMCs margins hard and badly.

Hence, the retail petrol and diesel prices may most likely not see the shift of excise duty cut.

Minister of Petroleum & Natural Gas, Hardeep Singh Puri said, "International crude prices have gone through the roof in the last 1 month from around 70 dollars/barrel to around 122 dollars/barrel."

Consequently, petrol and diesel prices for consumers have gone up all over the world. Data from Puri revealed that prices have increased by around 30%-50% in South East Asian countries, 30% in North American countries, 20% in Europe and 50% in African countries.

"The Modi Government had two choices- either increase prices drastically for citizens of Bharat as all other nations have done or bear the brunt on its finances so that Indian citizen is insulated from international volatility," he added.

Furthermore, Puri said that the Modi government has decided to take hit on its own finances again.

"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," Puri added.

Lastly, the minister said "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."

Will Excise Duty Cut Help OMCs?

Earlier, a report of Elara Capital highlighted that "Per our analysis, retail gasoline and diesel prices could be fully protected through excise cuts until $110/bbl crude. Beyond $110/bbl crude, gasoline and diesel price hike would become inevitable."

Furthermore, Elara's note explained that above $110/bbl crude, retail fuels price hike is unavoidable. At $125 crude, even after excise cut, retail price need to rise by ~INR 8-14/liter. At $150, the required rise spike to INR 26-30/liter. At that point, inflation shock would become visible and politically sensitive (seen in CY11-13). LPG is the bigger fiscal pain.

Every $1/bbl crude rise jumps LPG loss by ~Rs 1/kg, adding ~Rs 33bn to the subsidy. At $100/125/150 crude, LPG under-recovery could reach ~Rs 1.4/2.2/3.0 trillion. CNG is relatively protected. Gas cost rise by ~INR 0.4/kg per $1/bbl crude move, and excise duty flexibility allows absorption up to ~$100 crude. India can absorb a $40-45 crude shock via tax. Beyond $110/bbl, burden could shift from the government to consumers, as per the report.

Currently, both US WTI crude and Brent Crude has fallen nearly 1% on Friday. US WTI crude traded around $94 per barrel and Brent Crude performed above $107 per barrel. Despite the latest fall, both crude prices are up by 32% and 38% in a month, respectively.

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