In a late-night move on March 26, the Finance Ministry sharply cut the central excise burden on petrol and diesel, aiming to absorb part of the oil shock from the raging Middle East conflict. This was also meant to dispel fears that fuel bunkers would hike petrol and diesel prices.
The official ministry notification reduces the special additional excise duty on petrol to ₹3 per litre from the earlier ₹13 per litre, and slashes the levy on diesel to nil, replacing the earlier ₹10 per litre. The change takes effect immediately, as per the order.
However, it only applies to domestically sold fuel. Another ministry notification reworked the export side. For fuel shipped out of the country, the special additional excise duty on petrol was set to zero, but high-speed diesel exported from India would attract ₹18.5 per litre. This order excludes exports by public sector oil companies to Nepal, Bhutan, Bangladesh and Sri Lanka. This meant that the Centre is looking to ensure domestic availability while keeping the price hikes at bay.
In the background, global crude prices have surged by almost 50 per cent since the United States and Israel began strikes on Iran on February 28, briefly pushing oil to about $119 a barrel before easing to just below $100.
India has somehow managed to keep the retail prices of fuel frozen, with petrol not crossing ₹95 per litre and diesel ₹88 per litre in Delhi.
But this also meant that state-run retailers IOC, BPCL and HPCL were staring at steep under-recoveries on every litre sold.
This new excise duty cut effectively shifts part of that burden back onto the Centre, giving the oil companies more room to absorb high input costs while keeping pump prices unchanged.
In light of recent reports and social media discussions, we would like to reassure all stakeholders that the supply of petrol, diesel, and LPG across the IndianOil network in India remains stable and adequately maintained.
— Indian Oil Corp Ltd (@IndianOilcl) March 26, 2026
All IndianOil retail outlets are fully operational, and… pic.twitter.com/34NjfGkHyJ
But that did not stop some private players. Nayara Energy, which runs more than 6,900 of India’s 1-lakh+ petrol pumps, already raised petrol prices by ₹5 and diesel by ₹3 a litre. Jio-bp has so far held rates despite losses.
For consumers looking for an instant discount on petrol and diesel, this might come as a disappointment. But the excise duty cut is to cushion for global headwinds, and it is more of a policy decision by the Centre.
Despite the morning slump in the stock market, BPCL and HPCL shares were up. Only IOCL shares were trading 1 per cent lower.
