Centre Cuts Fuel Excise Duty to Ease Oil Company Losses Amid Global Price Surge

The Indian government has announced a significant reduction in excise duty on petrol and diesel, aiming to cushion the financial strain on oil marketing companies amid a sharp rise in global crude oil prices.

Union Petroleum Minister Hardeep Singh Puri stated that the government opted to absorb financial pressure rather than pass on the full burden of rising fuel costs to consumers. He highlighted that oil companies are currently incurring substantial losses, estimated at around ₹24 per litre on petrol and ₹30 per litre on diesel.

As per a notification issued by the Finance Ministry on March 26, the excise duty on petrol has been reduced from ₹13 per litre to ₹3 per litre. Meanwhile, diesel has been fully exempted from excise duty, down from ₹10 per litre. The revised rates have come into effect immediately.

The decision comes against the backdrop of surging international crude oil prices, which have climbed from approximately $70 per barrel to over $120 per barrel within a month. This spike has been largely attributed to escalating geopolitical tensions in the Middle East.

According to the minister, the government faced two choices—either significantly increase fuel prices for domestic consumers, as seen in several other countries, or absorb the financial impact to shield citizens from global volatility. The Centre chose the latter approach to maintain price stability.

He also acknowledged the leadership of Narendra Modi and Nirmala Sitharaman for taking what he described as a timely and strategic decision.

Despite the duty cuts, oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited continue to face financial pressure as retail fuel prices remain relatively stable in the domestic market.

Industry analysts, including rating agency ICRA, have warned that if crude prices sustain at around $100–105 per barrel, oil retailers could incur losses of ₹11 per litre on petrol and ₹14 per litre on diesel.

Currently, fuel prices in Delhi stand at ₹94.77 per litre for petrol and ₹87.67 per litre for diesel.

India, which imports nearly 88% of its crude oil and about half of its natural gas requirements, remains highly vulnerable to global supply disruptions. A significant portion of these imports passes through the Strait of Hormuz, making geopolitical developments in the region a key factor influencing domestic energy prices.