- The central government cut excise duty on petrol to zero from Rs 13 per litre
- Excise duty on diesel was reduced to Rs 3 from Rs 10 per litre
- The Department of Revenue under the Ministry of Finance issued the notification
The central government reduced the special additional excise duty on petrol and diesel amid elevated global crude oil prices. The Department of Revenue under the Ministry of Finance cut the excise on petrol to Rs 3 from Rs 13 per litre and on diesel to nil from Rs 10 per litre, according to a gazette notification issued late Thursday.
The move is expected to benefit oil marketing companies as they are incurring huge losses on sales due to high crude rates while keeping pump prices steady. A weaker rupee has also made crude imports more expensive.
According to Nomura, the blended marketing margin loss for OMCs currently stands at a staggering Rs 48.8 per litre.
India consumes roughly 325.7 million litres of diesel and 164.8 million litres of petrol every day.
If OMCs pass on the benefit of the excise duty cut to consumers then the impact will be neutral. The government will incur a loss of revenue of Rs 1.7 lakh crore or 5% of its gross, as per analysts.
MK Surana, former CMD of Hindustan Petroleum Corp., told NDTV Profit that higher crude prices and a weaker rupee can create liquidity issues for OMCs unless they adjust fuel prices at the pump. He noted that state governments had previously increased their Value Added Tax (VAT) when Centre cut excise, largely keeping prices unchanged for consumers.
Oil prices retreated on Friday after US President Donald Trump extended the timeline for possible action against Iran's energy infrastructure, giving markets a brief breather after days of sharp gains. Brent crude slipped to below $106 a barrel, while West Texas Intermediate was near $94 a barrel in early trade. The pullback came after a massive run-up in prices, with Brent having surged more than 45% so far this month.
(This copy has been updated to correct a previous error on the reduced excise rate.)
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