India Cuts Fuel Duties Amid Oil Price Surge
India has sharply reduced excise duties on petrol and diesel to shield consumers from rising global oil prices, while introducing windfall taxes on diesel and aviation fuel exports. The special excise duty on petrol fell from 13 rupees per litre to 3 rupees, and diesel duty was cut to zero from 10 rupees per litre. The move comes as oil prices exceed $100 per barrel following disruptions near the Strait of Hormuz due to the U.S.-Israel strike on Iran, and ahead of elections in four states and one union territory.
Economists warn that the tax cuts could strain government finances, with an estimated annual fiscal impact of 1.55 trillion rupees. Oil marketing companies have been facing losses of roughly 24 rupees per litre on petrol and 30 rupees per litre on diesel at current international prices. While shares of companies like Bharat Petroleum and HPCL initially rose on the news, gains later softened.
To ensure domestic availability, the government has imposed a 21.5-rupee-per-litre tax on diesel exports and a 29.5-rupee tax on aviation fuel exports. India, the world’s third-largest oil importer, relies heavily on Middle East imports for both fuel and cooking gas, with about 60% of domestic demand for cooking gas met through imports. Authorities stress that adequate supplies of fuel, fertilisers, and coal are in place to meet upcoming demand.
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