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The decision will not translate into lower retail fuel prices anytime soon, as the move is primarily aimed at shielding OMCs rather than passing on benefits directly to consumers.
Petrol, Diesel Prices On March 27.
Excise Duty On Petrol, Diesel Slashed: The government on Friday cut excise duty on petrol and diesel by Rs 10 per litre each, reducing the levy to Rs 3 per litre on petrol and nil on diesel. The decision is unlikely to translate into lower retail fuel prices anytime soon, as the move is primarily aimed at shielding oil marketing companies (OMCs) rather than passing on benefits directly to consumers.
The government has reduced excise duty on petrol by Rs 10 per litre to Rs 3, while diesel has been fully exempted from excise duty. The step comes amid a sharp surge in global crude oil prices triggered by the ongoing conflict involving the United States, Israel and Iran, and disruptions in the Strait of Hormuz, a key artery for global energy supplies.
However, despite the significant tax cut, petrol and diesel prices at the pump have remained unchanged.
Relief For OMCs, Not Consumers
The key reason lies in the financial pressure faced by state-run fuel retailers such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) amid rising crude oil prices, which currently stand at above $100 as against nearly $60 last month.
These companies have not revised retail prices despite a steep rise in crude oil costs, effectively absorbing losses to maintain price stability. Rating agency ICRA, in a note on Thursday, had said if the average crude oil price goes up to $100-105/bbl, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel, respectively.
ICRA had also said that the government may reduce excise duty rates on petrol and diesel to keep retail sale prices stable at existing levels, giving oil companies more headroom to collect additional revenue to compensate for refining losses.
Global Crisis Driving Policy Shift
The duty cut comes against the backdrop of a deepening global energy crisis. Crude oil prices have surged nearly 50 per cent since late February, briefly touching $119 per barrel before easing to around $100.
The trigger has been escalating tensions involving the US and Israel with Iran, along with Tehran’s effective blockade of the Strait of Hormuz, through which nearly 20-25 million barrels per day of oil flows globally.
For India, which imports nearly 88 per cent of its crude oil requirements, the disruption has significant implications. Around 12-15 per cent of India’s crude imports are routed through this corridor.
With tanker movements impacted and insurance cover withdrawn, supply risks have increased, pushing up procurement costs.
Why Prices Are Not Being Cut
There are three key reasons why consumers are unlikely to see immediate relief:
First, OMCs are currently facing margin pressure. The duty cut helps bridge this gap rather than create room for price reductions.
Second, the government is prioritising price stability over volatility. A sudden increase in retail prices could fuel inflation, especially at a time of global uncertainty.
Third, the current policy stance suggests a calibrated approach — absorb shocks through fiscal adjustments first, and pass on benefits only when crude prices stabilise.
Private Players Already Raising Prices
While state-run retailers have held prices steady, private players have begun passing on the cost burden.
Nayara Energy has increased petrol prices by Rs 5 per litre and diesel by Rs 3, reflecting the underlying pressure on margins. In contrast, Jio-bp has so far maintained prices despite incurring losses.
This divergence highlights the implicit burden being borne by public sector OMCs under the current pricing strategy.
Alongside the duty cuts, the government has imposed additional excise duty on aviation turbine fuel (ATF) and tightened export-related benefits, signalling a broader recalibration of fuel taxation.
The approach indicates a clear priority: ensure domestic fuel availability, protect consumers from immediate price shocks, and maintain financial viability of OMCs.
However, Jio-bp, the fuel retailing joint venture of Reliance Industries and BP Plc that owns 2,185 outlets, has, however, so far not raised prices despite incurring heavy losses on the sale of petrol and diesel.
State-owned fuel retailers, who control about 90 per cent of the market, continue to keep rates frozen. A litre of normal petrol in Delhi continues to cost Rs 94.77, while the same grade diesel comes for Rs 87.67 a litre.
March 27, 2026, 10:21 IST
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