PTI
New Delhi
The government slashed excise duty on petrol and diesel by Rs 10 per litre, averting retail price hike that had become necessary because of soaring global oil prices.
The cut in special additional excise duty on petrol from Rs 13 to Rs 3 per litre and on diesel from Rs 10 to zero will not lead to any change in retail pump prices as the reduction will be offset against fuel losses – estimated by Oil Minister Hardeep Singh Puri at Rs 24 per litre for petrol and Rs 30 for diesel, and by his ministry at Rs 26 and Rs 81.90, respectively.
Alongside, the government imposed an export duty of Rs 21.50 per litre on diesel and Rs 29.50 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levy first introduced in July 2022 to curb windfall gains by refiners following Russia’s invasion of Ukraine and later withdrawn in December 2024.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 domestically produced crude oil by firms like ONGC.
Prices of crude oil – the raw material for making petrol and diesel – have gone up.
They have risen from around $70 per barrel before the start of the conflict in the Middle East to over $100, said Sujata Sharma, joint secretary in the Ministry of Petroleum and Natural Gas.
“The government had two options – pass on the increase to consumers (by way of an increase in petrol and diesel prices) or take a hit (by cutting excise duty). The government chose the latter,” she told reporters.
Fuel prices in India have remained largely unchanged since April 2022 despite geopolitical shocks – from the Russia-Ukraine war to the Middle East crisis – that have driven sharp swings in global oil prices. The country depends on imports for 88 per cent of its crude oil needs.
In contrast, fuel prices have risen by 30-50 per cent across South and Southeast Asian countries, 30 per cent in North America, and 20 per cent in Europe since the onset of the current crisis.
CBIC chairman Vivek Chaturvedi said the windfall tax on exports will result in a gain of about Rs 1,500 crore in the first fortnight while the government will have to forgo over Rs 7,000 crore in revenue because of the excise duty cut.
Explaining the rationale for levy of the export tax in form of a special additional excise duty (SAED), he said the surge in international prices had created an incentive for refiners to export and this move will help make available fuel for domestic consumption.
Sharma said the 2022 requirement for refiners to sell 50 per cent of petrol exports and 30 per cent of diesel exports in the domestic market remains in place.
Chaturvedi said the export tax will be reviewed fortnightly – as was the practice previously – to align the duty with prevailing rates.
The government can levy up to Rs 50 per litre SAED on ATF.
However, the levy will not be applicable on fuel exported by public sector oil companies to Nepal, Bhutan, Bangladesh, and Sri Lanka. It will also not apply to ATF supplied to foreign going aircrafts.
The excise duty on petrol has been cut from Rs 21.90 per litre to Rs 11.90 and that on diesel from Rs 17.80 a litre to Rs 7.80, he said.
The war in the Middle East has not just led to a spike in international oil prices but also disrupted global energy supply chains. While India has managed to secure crude oil lost in the blockage of a critical shipping lane of Strait of Hormuz, cooking gas LPG supplies have been disrupted.
