Government Cuts Excise Duty on Petrol, Diesel; Relief Likely for OMCs
The move is likely to result in a revenue loss for the government in the upcoming financial year
In a significant move aimed at easing pressure on oil marketing companies (OMCs), the Government of India has slashed the special additional excise duty on petrol and diesel amid elevated global crude oil prices.
The Department of Revenue under the Ministry of Finance reduced the excise duty on petrol to ₹3 per litre from ₹13, and on diesel to nil from ₹10 per litre, according to a gazette notification issued late Thursday.
The decision comes at a time when OMCs have been under mounting financial stress due to persistently high global crude prices and a weakening rupee, which has made imports more expensive. Companies have been absorbing losses as retail fuel prices remained largely unchanged despite the surge in international oil rates.
India, one of the world’s largest fuel consumers, uses approximately 325.7 million litres of diesel and 164.8 million litres of petrol daily, amplifying the financial impact of under-recoveries for state-run fuel retailers.
The excise duty cut is expected to provide immediate relief to OMCs. However, if the companies choose to pass on the benefit to consumers through lower retail prices, the net impact on their margins may remain neutral.
The move is likely to result in a revenue loss for the government in the upcoming financial year, reflecting a trade-off between fiscal considerations and market stability.
Meanwhile, global oil prices showed signs of easing on Friday. Brent crude slipped below $106 per barrel, while West Texas Intermediate hovered near $94 per barrel in early trade. The decline followed remarks by Donald Trump, who extended the timeline for potential action against Iran’s energy infrastructure, calming markets after a sharp rally.
Brent crude had surged more than 45% so far this month, highlighting the volatility in global energy markets that continues to influence domestic fuel pricing dynamics.
