The Centre has cut excise duty to Rs three per litre from Rs 13 on petrol and to zero from Rs 10 for diesel. The announcement came in an order issued on Thursday by the Finance Ministry. This comes as fuel prices stay volatile amid the Iran war and the near closure of the Strait of Hormuz.
The changes were notified through amendments to the central excise rules and duty structures and will “come into force with immediate effect,” as per the Gazette notification. The ministry did not say how much the duty cuts would cost the government.
However, there is little to cheer for citizens as most of the cuts will be absorbed by oil marketing companies to who are under severe strain as the international oil prices have shot up by nearly 50 per cent. The oil marketing companies, including Indian Oil, Bharat Petroleum, and Hindustan Petroleum, are currently losing ₹48.8 per litre on every litre of petrol and diesel sold in India as Brent crude oil crosses $100 per barrel following the US-Israel war.
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The fuel prices in India have remained frozen so far, as India, the world's third-biggest oil importer and consumer, imports 88 per cent of its crude oil needs and roughly half of its natural gas requirement. These mostly come via the Strait of Hormuz.
Madhavi Arora, an economist at Emkay Global, estimated the annualised fiscal hit to be nearly 1.55 trillion rupees. “The duty cuts would absorb about 30%-40% of annual losses of oil marketing companies on auto fuel at current prices,” she told Reuters.
This comes as Nayara Energy, which operates 6,967 of India's 102,075 petrol pumps, decided to hike fuel prices to alleviate its burden. Petrol at Nayara pumps now costs Rs 100.71 a litre and diesel costs Rs 91.31 per litre. Jio-bp, the fuel retailing joint venture of Reliance Industries and BP Plc that owns 2,185 outlets, has so far not raised prices.
