Govt Cuts Excise Duty on Petrol, Diesel – But Pump Prices May Not Fall

Govt Cuts Excise Duty on Petrol, Diesel – But Pump Prices May Not Fall​

New Delhi – The Indian government has reduced excise duty on petrol to Rs 3 a litre and eliminated the levy on diesel, but consumers are unlikely to see a drop in fuel prices at the pump. The move, announced by the Finance Ministry on March 26, aims to provide relief to oil marketing companies, but rising global crude prices and strategic decisions by fuel retailers could negate the impact.
India relies heavily on imports for its energy needs, with 88% of its crude oil requirements and roughly half of its natural gas needs sourced externally, primarily through the Strait of Hormuz. Recent geopolitical tensions, particularly following military strikes against Iran by the United States and Israel, have significantly impacted global oil markets.
Global crude prices have risen by almost 50% since February 28, triggered by retaliatory actions from Iran. International prices touched $119 per barrel earlier this month before stabilizing around $106 a barrel.
The excise duty cut, effective immediately, was intended to stabilize retail fuel prices. However, rating agency ICRA has warned that if crude oil prices average between $100 and $105 per barrel, fuel retailers could incur losses of Rs 11 per litre on petrol and Rs 14 per litre on diesel.
Several fuel retailers are already adjusting prices. Nayara Energy, operating 6,967 petrol pumps, has raised petrol prices by Rs 5 per litre and diesel by Rs 3 per litre, with petrol now costing Rs 100.71 a litre and diesel Rs 91.31 a litre at its pumps.
Jio-bp, a major fuel retailer with 2,185 outlets, has so far resisted raising prices despite incurring significant losses. State-owned fuel retailers, controlling approximately 90% of the Indian market, continue to maintain existing prices. A litre of normal petrol in Delhi currently costs Rs 94.77, while diesel is priced at Rs 87.67.
The government’s excise duty reduction is intended to provide oil marketing companies with greater revenue collection potential to offset refining losses, as indicated by ICRA. Shares of fuel retailers IOC, BPCL, and HPCL opened higher on the BSE following the announcement.
The situation remains fluid, with the potential for further price adjustments by fuel retailers depending on fluctuations in international crude prices.