Petrol Price: Government Announces Major Cut in Excise Duty on Petrol and Diesel—Will Fuel Prices Come Down?

The government has reduced the Special Additional Excise Duty on petrol and diesel. According to Reuters, the excise duty on petrol has now been lowered to ₹3 per liter, down from the previous rate of ₹13 per liter. Meanwhile, the excise duty on diesel has been reduced from ₹10 per liter to zero. This move by the government is expected to lead to a reduction in petrol and diesel prices across the country. Additionally, the government has introduced a new levy framework for Aviation Turbine Fuel (ATF). Under these changes, a Special Additional Excise Duty of ₹50 per liter has now been imposed on ATF; however, this is partially offset through exemptions, bringing the effective duty down to approximately ₹29.5 per liter under specific provisions.

Why Did the Government Reduce Excise Duty?

This move comes against the backdrop of a deepening global energy crisis, triggered by the ongoing conflict involving the U.S., Israel, and Iran, as well as Tehran’s blockade of the Strait of Hormuz. This is a critical maritime route through which approximately one-fifth of the world’s crude oil and gas supply—estimated at 20–25 million barrels per day—is transported.

Prior to the conflict, India sourced approximately 12–15% of its crude oil imports through this vital corridor. This substantial reduction is expected to alleviate cost pressures on Oil Marketing Companies (OMCs) and help mitigate the impact of high global crude oil prices, which remain volatile due to geopolitical tensions. It is worth noting that Nayara Energy—a Russian-owned petroleum company operating in India—recently hiked the prices of petrol and diesel just yesterday. However, other companies have not yet raised their petrol and diesel prices; increases have been limited solely to the prices of premium petrol.

Export Benefits Curtailed

The government has also tightened regulations regarding fuel exports and has withdrawn the broad excise duty exemptions previously available for consignments of petrol, diesel, and ATF. Under the revised framework, export-related benefits will now be restricted to specific and clearly defined categories, reflecting a more balanced and restrictive policy stance.