The Finance Ministry has sharply reduced central excise duty on petrol to ₹3 per litre from ₹13 and eliminated it on diesel, effective immediately, in a bid to cushion state-run oil marketing companies from mounting losses caused by the surge in global crude prices.
Finance Minister Nirmala Sitharaman said the decision was taken to protect citizens from the vagaries of supply costs amid the West Asia crisis.
The duty cuts, however, will not lower prices at the pump. Retail rates set by Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — which together control about 90 per cent of the fuel market — have been frozen since April 2022. Petrol in Delhi continues to retail at ₹94.77 per litre and diesel at ₹87.67.
The three state-run retailers have been under severe financial strain. Rating agency ICRA, in a note published on Thursday, said that if average crude oil prices rise to $100–105 a barrel, fuel retailers would incur losses of ₹11 per litre on petrol and ₹14 per litre on diesel. Brent crude has surged roughly 74 per cent since late February — from around $70 a barrel to a peak of approximately $119–122 — before easing to just under $100. Petroleum Minister Hardeep Singh Puri, posting on X, said the government had taken a significant hit on its revenues to offset company-level losses of approximately ₹24 per litre on petrol and ₹30 per litre on diesel at current international prices.
The announcement came a day after Nayara Energy, which operates around seven thousand of the country's over a lakh petrol pumps, raised petrol by ₹5 per litre and diesel by ₹3 — the first major retailer to pass on higher input costs to consumers.
India imports 88 per cent of its crude oil. Retail fuel prices have been frozen since April 2022, with OMCs absorbing losses when crude is high and recouping margins when it softens. The last government intervention on excise was in May 2022, when the Centre cut duty by ₹8 on petrol and ₹6 on diesel following the spike in global prices triggered by the Russia-Ukraine war.