The Indian government has reduced excise duty on petrol and diesel by ₹10 per litre. This decision comes at a time when global crude oil prices have sharply increased due to the ongoing Iran-related conflict.

Crude oil prices have risen from around $70 per barrel to over $100 in the international market. This has pushed fuel prices higher across the world.

Recent Price Hike by Private Retailer

The move follows a recent increase in fuel prices by Nayara Energy. The company raised petrol prices by ₹5.3 per litre and diesel prices by ₹3 per litre.

Nayara Energy, backed by Russia’s Rosneft and Kesani Enterprises, holds about 8.4% share in India’s fuel market.

New Tax Structure Explained

The government has reduced the special additional excise duty on petrol from ₹13 to ₹3. For diesel, this component has been cut to zero. These changes have been implemented immediately.

At present, the central government collects ₹11.90 per litre on petrol and ₹7.8 per litre on diesel as total excise duty.

Break-up of Petrol Taxes

• Basic Excise Duty: ₹1.4
• Special Additional Excise Duty: ₹3
• Agriculture Infrastructure & Development Cess: ₹2.5
• Road and Infrastructure Cess: ₹5

Break-up of Diesel Taxes

• Basic Excise Duty: ₹1.8
• Special Additional Excise Duty: Nil
• Agriculture Infrastructure & Development Cess: ₹4
• Road and Infrastructure Cess: ₹2

For comparison, in May 2020, excise duty was much higher at ₹32.98 per litre for petrol and ₹31.83 for diesel.

Export Duties Imposed to Secure Supply

The government has also imposed export duties on diesel and Aviation Turbine Fuel (ATF). This step aims to ensure enough fuel is available for domestic use.

Government Explains the Decision

Petroleum Minister Hardeep Singh Puri explained the situation on X.

He said, “International crude prices have gone through the roof in the last month, from around $70 (Rs 6,622.70) per barrel to around $122 (Rs 11,542.42) per barrel. Consequently, petrol and diesel prices for consumers have gone up all over the world. Prices have increased by around 30 to 50 per cent in South East Asian countries, 30 per cent in North American countries, 20 per cent in Europe, and 50 per cent in African countries.”

He added, “The Modi government had two choices - either increase prices drastically for citizens of Bharat as all other nations have done or bear the brunt on its finances so that Indian citizens are insulated from international volatility.”

“… in keeping with the commitment of the last four years, since the conflict in Russia-Ukraine started, the government decided to take a hit on its own finances again to safeguard the Indian citizen,” he said.

Impact on Economy and Consumers

Government officials have asked oil marketing companies not to raise fuel prices. The aim is to ensure that the benefit of the tax cut reaches consumers.

Economist Madhavi Arora said the reduction in excise duty could cost the government around ₹1.55 lakh crore in revenue.

Why This Move Matters

India has tried to control fuel prices despite rising global costs. In contrast, fuel prices have increased sharply in many parts of the world. Prices have gone up by about 20% in Europe, 30% in North America, and between 30% and 50% in South and Southeast Asia.