Centre slashes fuel duty, eases export curbs
Rs 10 cut on petrol, diesel to cushion consumers | Retail prices shielded as crude continues to climb
image for illustrative purpose
The government on Friday cut excise duty on petrol and diesel by Rs 10 per litre, choosing to absorb the impact of soaring global oil prices instead of passing it on to consumers. However, retail fuel prices will remain unchanged as the duty cut will offset losses currently being borne by oil marketing companies (OMCs).
The special additional excise duty on petrol has been reduced from Rs 13 to Rs 3 per litre and on diesel from Rs 10 to zero. Oil Minister Hardeep Singh Puri estimated losses at Rs 24 per litre on petrol and Rs 30 on diesel, while the petroleum ministry pegged under-recoveries higher at Rs 26 and Rs 81.90 per litre, respectively. The combined daily under-recovery for OMCs is around Rs 2,400 crore.
To balance the fiscal impact, the government imposed export duties of Rs 21.50 per litre on diesel and Rs 29.50 per litre on aviation turbine fuel (ATF), reviving a levy first introduced in July 2022 and withdrawn in December 2024. Unlike earlier, no windfall tax has been imposed on domestically produced crude oil.
Officials said the move aims to curb excessive exports by refiners and ensure adequate domestic fuel supply. The export duty will be reviewed every fortnight. Existing norms requiring refiners to sell part of their output domestically—50 per cent of petrol and 30 per cent of diesel—remain unchanged.
Global crude prices have surged from about USD 70 per barrel before the Middle East conflict to over USD 100, disrupting supply chains. India, which imports 88 per cent of its crude needs, has managed to secure supplies despite disruptions, though LPG availability has been affected. State-run firms have increased LPG production by 40 per cent by diverting petrochemical feedstock, adding to financial stress.
Despite global volatility, fuel prices in India have remained largely unchanged since April 2022. In contrast, prices have risen sharply worldwide—30–50 per cent in South and Southeast Asia, about 30 per cent in North America, and 20 per cent in Europe.
The excise duty cut will cost the exchequer over Rs 7,000 crore in the short term and an estimated Rs 1.75 lakh crore annually, based on total fuel consumption of 175 billion litres. Export duties are expected to generate about Rs 1,500 crore in the first fortnight.
Private retailer Nayara Energy has already raised prices, with petrol at Rs 100.71 and diesel at Rs 91.31 per litre. State-run retailers, which dominate 90 per cent of the market, have kept prices steady.
Finance Minister Nirmala Sitharaman said the move shields consumers from rising costs, while Puri stressed that the government chose to take a fiscal hit to protect citizens. He also dismissed rumours of a lockdown, calling them baseless, and said the government is closely monitoring the evolving global situation.
