In a major decision amid rising global oil prices, the central government has sharply reduced excise duty on fuel, cutting petrol duty to Rs 3 per litre and removing excise duty on diesel completely.
The move is aimed at providing relief to state-run oil companies like Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, which have been under heavy financial pressure due to soaring crude prices and frozen retail rates.
The decision, notified by the Finance Ministry on March 26, comes into effect immediately and is being seen as a crucial step to stabilise the fuel sector.
Why Did the Government Cut Excise Duty?
Oil marketing companies have been facing massive losses as petrol and diesel prices in India remained unchanged despite a sharp increase in global crude oil prices.
Since the escalation of the Middle East conflict involving Iran, United States and Israel, international oil prices surged nearly 50 percent, touching as high as $119 per barrel before stabilising around $100.
Despite this, fuel retailers have not increased pump prices significantly, leading to financial strain.
How Much Loss Are Oil Companies Facing?
According to estimates, if crude oil prices remain in the range of $100–105 per barrel, oil companies could incur losses of around Rs 11 per litre on petrol and Rs 14 per litre on diesel.
This has created pressure on both public and private fuel retailers operating in India.
What Are Current Fuel Prices?
Even after the global surge, fuel prices in Delhi have remained stable:
- Petrol: Rs 94.77 per litre
- Diesel: Rs 87.67 per litre
However, some private players like Nayara Energy have started passing on the increased costs to consumers, with petrol prices crossing Rs 100 per litre at their outlets.
On the other hand, Jio-bp has not increased prices yet, despite facing losses.
How Is Global Situation Affecting India?
India imports nearly 88 percent of its crude oil and a significant portion of natural gas, much of which passes through the Strait of Hormuz.
The conflict has disrupted this crucial route, with Iran blocking parts of the passage and insurers withdrawing coverage, leading to supply concerns and price volatility.
What Does This Mean for Consumers?
The excise duty cut is expected to ease pressure on oil companies and prevent a sharp increase in fuel prices for consumers in the short term.
However, if global oil prices remain high for a longer period, further policy decisions may be required to maintain stability.
Big Picture
The government’s move highlights the growing impact of global geopolitical tensions on India’s economy. By reducing taxes, the Centre is trying to balance rising costs while protecting consumers and ensuring fuel availability.
