Explained : Government cuts excise duties on petrol, diesel and Its Impact

The Indian government has cut special additional duties for petrol and diesel in a respite for oil marketing companies who are struggling with a global oil disruption triggered by the US-Israel war with Iran. 

In a government order on Thursday, the center-imposed excise duty for petrol was brought down to 3 rupees (€0.028, $0.032) per liter from 13 rupees earlier while the duty on diesel was eliminated entirely, down from 10 rupees.

The Iran war and Tehran’s consequent chokehold on the crucial Strait of Hormuz has upended oil and gas export, sending global crude oil prices soaring.

India has also seen the impact of the volatility in crude prices and oil and gas disruptions.

India is the world’s third-biggest oil importer and ​consumer and as per official estimates some 40% of India’s energy needs depend on supplies passing through Hormuz. 

India’s oil minister said in a statement on Friday that the Indian government, headed by Prime Minister Narendra Modi, chose to shield its citizens from the steep increase in global crude prices by taking a loss on its own finances.

“The Modi Government had two choices — either increase prices drastically for citizens” or “bear the brunt on its finances so that Indian citizen is insulated from international volatility,” Minister for Petroleum and Natural Gas Hardeep Singh Puri said on X.

Puri said that the government has taken a “huge hit”on its taxation revenues to ensure that the very high losses of oil companies are reduced. 

The reduction in excise duties has left Indians wondering whether fuel prices at petrol stations will get cheaper.

Indian news outlets NDTV and India Today cited industry experts as saying that consumers may not see a cut in fuel retail prices immediately as the reductions will largely be absorbed by oil marketing companies, who have been selling petrol and diesel at a loss.

On Friday, petrol prices across major Indian cities remained mostly unchanged.