NEW DELHI, 27 Mar: The government has slashed excise duty on petrol and diesel by Rs 10 per litre, averting a pump price hike that had become necessary because of soaring global oil prices.
The cut in special additional excise duty on petrol from Rs 13 a litre to Rs 3 and the same on diesel from Rs 10 per litre to nil, will lead to an estimated revenue loss of Rs 1.75 lakh crore.
Alongside, the government brought back duties on export of diesel and aviation turbine fuel (ATF), according to a notification issued late on Thursday.
The government also imposed an export duty of Rs 21.5 per litre on diesel and Rs 29.5 per litre on aviation turbine fuel (ATF), reinstating a levy first introduced in July 2022 to curb windfall gains by refiners following Russia’s invasion of Ukraine and later withdrawn in December 2024.
However, unlike last time, there is no windfall tax that has been levied on domestic crude oil producers like ONGC.
The war in the Middle East has pushed international oil prices up by 50 percent to over USD 100 per barrel. At current international crude prices, petrol prices should have been increased by Rs 26 a litre and diesel by Rs 81.90.
While state-owned oil marketing companies had so far been absorbing the impact of high oil prices, the current situation had become financially untenable, sources said, adding that to mitigate some of the losses, the government cut excise duty which has been adjusted against the required increase in prices.
Pump prices remain unchanged after the excise revision.
After reduction in duty, the incidence of excise on petrol will be Rs 11.9 per litre (Rs 1.40 basic excise duty, Rs 3 special additional excise duty, Rs 2.50 agriculture infrastructure and development cess, and Rs 5 road infrastructure cess).
On diesel, the incidence will be Rs 7.80 per litre (Rs 1.80 basis excise duty, Rs 4 agriculture infrastructure and development cess, and Rs 2 road and infrastructure cess).
Considering 175 billion litres of auto fuel sales annually (115 billion litres of diesel and 60 billion litres of petrol), the impact of the duty cut will be Rs 1.75 lakh crore annually.
The excise duty cut follows record losses that oil companies suffered from the surge in international oil prices. Prices of crude oil, the raw material for making petrol and diesel, have surged almost 50 percent this month as the US and Israel attack on Iran and Tehran’s sweeping retaliation disrupts global supply.
Despite oil prices rising above USD 100 per barrel, retail pump rates had remained on freeze. This had led to oil companies incurring record losses which had even started impacting their working capital.
To ease the pain, the government cut excise duty. The reduction will be adjusted against the Rs 24 a litre required increase in petrol and Rs 30 per litre hike in diesel rates warranted due to the rise in international oil prices.
Rating agency ICRA in a note on Thursday said if the average crude oil price goes up to USD 100-105 per barrel, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel, respectively.
International oil prices touched USD 119 per barrel earlier this month on the intensifying Iran war, before pulling back to around USD 100 a barrel.
The first signs of stress came when Nayara Energy, the country’s largest private fuel retailer, raised petrol price by Rs 5 per litre and diesel by Rs 3 a litre on Thursday. Petrol at Nayara pumps now costs Rs 100.71 a litre and diesel costs Rs 91.31 per litre.
State-owned fuel retailers, who control about 90 percent of the market, continue to keep rates frozen. A litre of normal petrol in Delhi continues to cost Rs 94.77 at their outlets, while the same grade diesel comes for Rs 87.67 a litre.
“At current international crude prices, under-recoveries stand at approximately Rs 26 per litre on petrol and Rs 81.90 per litre on diesel. The combined daily under-recovery being absorbed by OMCs is approximately Rs 2,400 crore,” an oil ministry statement said. The Congress on Friday claimed that the government’s excise cuts will not change prices for dealers and consumers, and that the relief exists only in the narrative, not in reality.
The government has slashed excise duty on petrol to Rs 3 per litre and exempted diesel fully from the duty.
The Congress said the government should focus on delivering actual relief to consumers, instead of “manufacturing headlines and fooling people.”
The party’s media and publicity department head, Pawan Khera, said, “If you saw the headlines about petrol and diesel prices ‘coming down’ and thought the government had offered relief to your pocket, you’d be mistaken.”
As of now, prices remain the same for dealers and for consumers, he claimed. (PTI)
