The government has reduced the Special Additional Excise Duty on petrol and diesel by Rs 10 per litre each, aiming to protect consumers from rising global fuel prices while easing pressure on oil companies.
The move, announced by the Ministry of Petroleum and Natural Gas on March 27, comes as international crude prices have surged sharply due to the ongoing West Asia conflict.
Despite the tax cut, retail prices of petrol and diesel will remain unchanged. Instead, the benefit will go to public sector oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation, which have been absorbing heavy losses.
Under-recoveries currently stand at about Rs 26 per litre on petrol and Rs 81.90 per litre on diesel, with combined daily losses estimated at Rs 2,400 crore. The excise cut offsets Rs 10 per litre of these losses, helping companies continue supply without raising pump prices.
Following the revision, total excise duty on petrol has been reduced to Rs 11.9 per litre and to Rs 7.8 per litre on diesel. The central levy now stands at Rs 3 per litre on petrol and nil on diesel.
To ensure domestic availability, the government has also imposed export duties of Rs 21.5 per litre on diesel and Rs 29.5 per litre on aviation turbine fuel. These rates will be reviewed every fortnight.
The decision is expected to significantly impact government finances, with estimates suggesting an annual revenue loss of around Rs 1.5 lakh crore to Rs 1.7 lakh crore. Revenue from export duties is projected to offset only a small portion of this loss.
The move follows rising stress on fuel retailers as global crude prices have climbed roughly 50% since late February. While public sector companies held prices steady, private retailer Nayara Energy raised petrol and diesel prices to partly pass on higher costs.
Petroleum Minister Hardeep Singh Puri said the government chose to absorb the financial burden rather than pass on sharp price increases to consumers, noting that fuel prices have risen significantly across other regions globally.
Amid reports of panic buying, the government has also clarified that there is no fuel shortage or lockdown proposal, adding that India has sufficient stocks to meet demand for the coming weeks and imports have been secured for the near term.