Centre cuts special excise duty on petrol to Rs 3 per litre, diesel to nil

The Union government on Thursday cut the special additional excise duty on petrol ⁠to Rs 3 per litre from Rs 13 per litre, and on diesel to zero from Rs 10.

Fuel marketing companies in the country have been under strain as retail petrol and diesel prices remain frozen despite a nearly 50% surge in international oil prices since the conflict began in West Asia on February 28. The reduction in the special additional excise duty is expected to help them keep petrol and diesel prices stable.

Union Minister for Petroleum and Natural Gas Hardeep Singh Puri said that the government “has taken a huge hit on its taxation revenues” to make sure that the losses of oil companies are reduced.

“At the same time, export tax has been levied as international prices of petrol and diesel have skyrocketed and any refinery exporting to foreign nations will have to pay export tax,” Puri said.

Union Finance Minister Nirmala Sitharaman said that duties on exporting diesel have been set at Rs 21.5 per litre, while levies on exports of aviation turbine fuel have been set at Rs 29.5 per litre. Sitharaman said the decision will ensure adequate availability of these products for domestic consumption.

However, Congress leader Pawan Khera said that the announcement on the reduction of levies on petrol and diesel should not be interpreted as relief to common citizens, and noted that prices for dealers and consumers currently remain the same.

“Relief exists but only in the narrative – not in reality,” Khera said. “Instead of manufacturing headlines and fooling people, the government should focus on delivering actual relief to consumers.”

Amid the conflict, Iran has effectively blocked the Strait of Hormuz, the narrow waterbody connecting the Gulf to the Arabian Sea, for most international commercial vessels. About 20% of global petroleum supply passes through the maritime chokepoint.

India imports 88% of its crude oil needs and about half of its natural gas requirement. This mostly comes through the Strait of Hormuz.

Following a marginal drop in global oil prices on Wednesday amid the conflict, the benchmark Brent crude was again trading above the $100 per barrel-mark on Thursday. The price was $78 per barrel on February 27, a day before the conflict started.

On Friday, Brent crude was trading at $107 per barrel.

Rating agency Investment Information and Credit Rating Agency of India Limited had earlier said that if the average crude oil price goes up to $100-105 per barrel, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel, PTI reported.

Centre says India has oil for 60 days, LPG for a month

The Ministry of Petroleum and Natural Gas on Thursday also said that crude oil supplies have been secured for the next 60 days, and supplies of liquefied petroleum gas for about a month have also been arranged.

“Nearly two months of steady supply is available for every Indian citizen regardless of what happens globally,” it said. “Next two months of crude procurement has also been secured.”

The ministry also maintained that there is no shortage of LPG in the country. It said that domestic refinery production has been increased by 40% due to which the net daily import requirement has reduced to 30,000 metric tonnes.

This means that the country “is now producing much more than it needs to import,” the Centre said.