Govt slashes excise duty on petrol and diesel; check new rates

The government has cut fuel excise duty amid heightened volatility in domestic fuel pricing. It has slashed petrol duty to Rs 3 from Rs 13 earlier, and has removed duty on diesel from Rs 10 previously. The changes will come into force with immediate effect. There is no change in retail prices.

The notification stated that the duty will apply to "any goods other than the goods cleared for export" and "exports by Public Sector Oil Companies to Nepal, Bhutan, Bangladesh and Sri Lanka".

Madhavi Arora, Chief Economist at Emkay Global said with the cut in petrol and diesel prices, the government will absorb ~30-40 per cent of annualised losses of OMCs on auto fuel at current prices. The annualised fiscal hit to the government would be ~Rs 1.55 lakh crore owing to this burden sharing, she said.

A government official told Business Today that the cut has been announced to offset rising global prices, and that OMCs have been instructed to not increase prices.

Meanwhile, Nayara Energy increased petrol prices by Rs 5 per litre and diesel by Rs 3 per litre on Thursday, becoming the first major fuel retailer in India to partially pass on the recent rise in global oil prices to consumers. Nayara Energy operates 6,967 petrol pumps across the country’s total of 102,075 outlets. The company has adjusted retail prices to partly offset cost pressures, with the effective increase varying by state due to local taxes such as VAT. In some regions, petrol prices have risen by up to Rs 5.30 per litre.

Other private fuel retailers have not yet raised prices. Jio-bp, a joint venture between Reliance Industries and BP Plc that runs 2,185 outlets, has maintained current rates despite losses on fuel sales.

State-owned retailers including Indian Oil Corporation, Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd, which together hold about 90 per cent of the market, have also kept their petrol and diesel prices unchanged.

Retail petrol and diesel prices have been frozen since April 2022, even as global oil prices surged. Crude prices increased nearly 50 per cent following military strikes by the United States and Israel against Iran in late February, which triggered retaliatory actions and supply disruptions.

International oil prices reached $119 per barrel earlier this month before easing to around $100. Sources noted that private fuel retailers do not receive government compensation to cover losses from holding prices steady, unlike state-owned firms, leaving them with limited options as losses increase.