Excise Duty Cut On Petrol, Diesel

(MENAFN- Kashmir Observer) New Delhi- The government on Friday cut excise duty on petrol and diesel by Rs 10 per litre each but said retail prices will remain unchanged, as the reduction is being used to offset rising input costs amid a sharp surge in global crude oil prices.

The move effectively prevents a hike in fuel prices that had become imminent following a nearly 50 per cent increase in international oil prices over the past month.

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The cut reduces the special additional excise duty on petrol from Rs 13 to Rs 3 per litre and eliminates the Rs 10 per litre levy on diesel. However, the benefit will not be passed on to consumers, as oil marketing companies are currently absorbing heavy losses.

According to Oil Minister Hardeep Singh Puri, losses stand at around Rs 24 per litre on petrol and Rs 30 per litre on diesel. The petroleum ministry, in a separate assessment, pegged under-recoveries at about Rs 26 per litre for petrol and Rs 81.90 per litre for diesel, with daily losses estimated at Rs 2,400 crore.

Explaining the decision, a senior official said the government had two choices, either pass on the price increase to consumers or absorb the shock through tax cuts.“The government chose to protect consumers,” the official said.

Alongside the excise cut, 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), reviving a levy first introduced in 2022 to curb excessive exports during periods of high global prices.

Officials said the export duty is aimed at ensuring adequate domestic availability of fuel, as elevated international prices tend to incentivise refiners to prioritise exports.

CBIC Chairman Vivek Chaturvedi said the export duty is expected to generate about Rs 1,500 crore in the first fortnight, while the excise cut will result in a revenue loss of over Rs 7,000 crore for the government.

Notably, unlike previous measures, no windfall tax has been imposed on domestically produced crude oil.

Global crude prices have surged from around USD 70 per barrel before the onset of the West Asia conflict to over USD 100 per barrel, significantly increasing input costs. India, which imports nearly 88 per cent of its crude oil requirements, remains vulnerable to such price shocks.

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Despite global volatility, fuel prices in India have remained largely unchanged since April 2022. In contrast, prices have risen sharply across other regions, including 30–50 per cent in South and Southeast Asia, 30 per cent in North America, and about 20 per cent in Europe.

Officials said the export duty will be reviewed every fortnight in line with international price movements. The levy will not apply to supplies made by public sector oil companies to neighbouring countries such as Nepal, Bhutan, Bangladesh and Sri Lanka, or to fuel supplied to foreign-bound aircraft.

Meanwhile, state-run oil companies have increased domestic LPG production by diverting feedstock from petrochemical output to ensure supply, even as global disruptions have impacted availability.

At current rates, excise duty on petrol stands at Rs 11.90 per litre, while diesel attracts Rs 7.80 per litre. Industry estimates suggest the annual revenue impact of the duty cut could be around Rs 1.75 lakh crore, based on total fuel consumption.

Private retailer Nayara Energy has already raised fuel prices, with petrol crossing Rs 100 per litre and diesel over Rs 91. However, state-owned companies, which dominate nearly 90 per cent of the market, have kept prices unchanged.

Finance Minister Nirmala Sitharaman said the excise cut will shield consumers from rising global costs, while the export duty will help ensure adequate domestic availability of fuel.

The government, she said, remains committed to protecting citizens from volatility in essential commodities, even as global energy markets remain under stress.

LG Hails PM's Decision

Lieutenant Governor Manoj Sinha on Friday hailed Prime Minister Narendra Modi for his decision to insulate households from supply disruptions triggered by the West Asia crisis.
“Prioritizing citizen welfare, Modi has taken a historic decision to insulate households from supply disruptions triggered by the West Asia crisis. The measures reflect his commitment to protect the standard of living for ordinary Indians,” the Lt Governor said in a post on X.

He said the central excise duty was slashed by Rs 10 per litre on both petrol and diesel, shielding consumers from escalating costs.

“Export duties strategically levied at Rs 21.5 per litre on diesel and Rs 29.5 on aviation turbine fuel, prioritizing ample domestic supply. My deepest gratitude to Modi for this visionary intervention, which ensures affordability, restrains price escalation, and prioritizes India's interests above all,” the Lieutenant Governor said.

Sinha said while global markets are in turmoil, the Indian citizens remain shielded and secure.

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