The government's decision to cut excise duty on petrol and diesel by Rs 10 per litre has raised hopes of cheaper fuel. The move brings excise duty down to Rs 3 per litre on petrol (from Rs 13) and nil on diesel (from Rs 10). On paper, this should translate into lower prices at the pump. But in reality, the answer is more complicated — and for now, a price drop is unlikely for most consumers.
Unlike earlier regimes, fuel prices in India are not directly set by the government. They are determined by oil marketing companies (OMCs) such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.
These companies factor in:
- Global crude oil prices
- Exchange rates
- Their own margins and losses
Oil Companies Under Pressure
According to government and industry estimates, OMCs are currently losing Rs 24-30 per litre on petrol and diesel sales due to the sharp rise in global crude prices.
Crude has surged from around $70 to over $120 per barrel amid the ongoing West Asia conflict and disruptions around the Strait of Hormuz, a key route for global oil supplies. In such a scenario, companies are more likely to use the tax cut to offset losses rather than pass on the full benefit to consumers immediately.
ALSO READ: Government Imposes Levies On ATF Amid Excise Changes; Cuts Fuel Duties — Check Exemptions
Petroleum Minister Hardeep Singh Puri has made it clear that the government had two choices — pass on the full burden of rising crude prices or absorb part of the shock.
Finance Minister Nirmala Sitharaman also indicated that the duty cut is aimed at protecting consumers from a sharp spike, not necessarily forcing an immediate price reduction.
So What Should Consumers Expect?
In the near term, prices may not fall significantly, but further hikes could be avoided
The excise cut acts as a buffer, giving oil companies room to manage costs without raising retail prices further — especially at a time when global crude remains volatile.
ALSO READ: US-Iran War: Government Absorbing Oil Shock To Shield Consumers, Say Hardeep Puri
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
