Fuel tax cut: India lowers excise duty on petrol, diesel to support OMCs

The move aims to share the financial burden arising from a sharp rise in global crude oil prices, which have surged to around $122 per barrel.
| Photo Credit:
Hollie Adams

To provide relief to Oil Marketing Companies from under-recovery, the Finance Ministry has announced a cut in components of Central Excise Duty on petrol and diesel. However, there will be no change in the retail prices of these products.

Duty cut to ease OMC losses

After a series of notifications issued, Finance Minister Nirmala Sitharaman said that in view of the West Asia crisis, the central excise duty on petrol and diesel for domestic consumption has been reduced by ₹10 per litre each. “This will provide protection to consumers from rise in prices. Hon. PM @narendramodi has always ensured that citizens are protected from vagaries of supply and costs of essential goods,” she said.

Further, duties have been imposed on Diesel exports at ₹21.5 per litre and on ATF exports at ₹29.5 per litre. “This will ensure adequate availability of these products for domestic consumption. The Parliament has been notified about the same,” she added.

Global crude surge cited for price pressure

Reacting to the cut, Oil Minister Hardeep Singh Puri said that international crude prices have gone through the roof in the last 1 month to $122 a barrel from around 70 dollars/ Consequently, petrol and diesel prices for consumers have gone up all over the world. “Prices have increased by around 30-50 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 said while adding that the 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 citizen is insulated from international volatility.

Government absorbs fiscal hit to protect consumers

Prime Minister, in keeping with his Government’s commitment of the last 4 years since the conflict in Russia-Ukraine started, decided to take a hit on its own finances again to safeguard the Indian citizen,” he said. The government has taken a huge hit to its tax revenues to ensure very high losses for oil companies (approximately ₹24/litre for petrol and ₹30/litre for diesel) as international prices have fallen. At the same time, an export tax has been levied as international prices of petrol and diesel have skyrocketed, and any refinery exporting to foreign nations will have to pay it.

Madhavi Arora, Chief Economist of Emkay Global, says such a move will help in absorbing 30-40 per cent of annualised losses of OMCs on auto fuel at current prices. “The annualised fiscal hit to the govt. would be Rs 1.55 lakh crore owing to this burden sharing,” she said.

Published on March 27, 2026