On Friday, the government reduced customs duties on gasoline and diesel by a percentage $10 per liter each and impose duties on exports of diesel and aviation turbine fuel (ATF), in a dual measure aimed at easing financial pressure on state-run oil retailers and ensuring adequate domestic stocks – although consumers will not see any drop in pump prices, with the tariff relief being used instead to partly offset heavy losses oil companies are taking to keep retail prices steady.
Reducing special surcharges on gasoline $13 a ₹3 and “>liter to $3 and diesel from $10 per liter to 0, will result in an estimated revenue loss of $1.70 lakh crore if the entire financial year continues.
Finance Minister Nirmala Sitharaman announced the reduction in Special Additional Excise Duty (SAED) in a post on X, saying the move would “provide protection to consumers from price hikes”. State-run retailers such as IOC, BPCL and HPCL have kept petrol $94.77 liters and diesel at a price $87.67 in Delhi since 15 March 2024.
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In addition to the duties imposed on the export of diesel and jet fuel, the government said that all refineries have been directed to divert 50% of exported gasoline and 30% of exported diesel to the local market.
The Ministry of Petroleum statement set low recovery rates – hypothetical revenue losses per liter sold below cost compared to international prices – at approximately $26 per liter of gasoline $81.90 per liter on diesel at current product prices.
Benchmark Brent crude closed at $108.01 a barrel on Thursday, up about 48% from $72.87 before the conflict began on February 28, and was trading at $110.40 on Friday afternoon.
India’s average monthly crude oil import price, known as the Indian Basket, rose to $111.93 per barrel on the 27th from $69.01 in the previous month, registering a 62.2% rise. Benchmark gasoline jumped 70% to $127.67 this month from February, and diesel rose 108% to $178.76 a barrel, according to PPAC data.
Petroleum Minister Hardeep Puri said in his post
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To be sure, the three state-run oil management companies had accumulated significant net profits in the nine months before the conflict, when global crude oil prices were well below current levels even as pump prices had remained unchanged since March 2024. Their combined net profits exceed $57,810 crore in the first nine months of FY26, up 192% from $They earned Rs 19,768 crore in the same period in FY25. The current losses, in part, represent a decline in those gains.
Friday’s cuts mirror a move that occurred in April last year, when the government raised the SAED rate by 1 $2 liters on both types of fuel for a gain of approx $34,000 crores per annum without compromising pump prices. This increase itself came after two rounds of tax cuts in November 2021 and May 2022 – a total of $13 liters of gasoline and $Dec. 16 on diesel — which was used to reduce pump prices when the price of crude oil rose during the conflict between Russia and Ukraine.
Including duties and other taxes, the total central excise duty on petrol falls from $21.90 LBP $11.90 per liter on diesel from $17.80 to $7.80, said CBIC Chairman Vivek Chaturvedi. As for gasoline, the remaining fees include the basic excise duty of $1.40 Agricultural infrastructure and development $2.50 Roads and infrastructure are halted $5; On diesel, basic tariffs $1.80 Agricultural infrastructure and development $4 And the road stopped $2.
Since the SAED is not part of the divisible pool shared with the states, the entire revenue impact falls on the central government. Chaturvedi estimated that the cuts would cost the exchequer approx $Rs 7,000 crore in two weeks; Export duties on diesel and ATF are expected to recover $1,500 crores during the same period. If maintained for a full fiscal year, the annual cost of tariff reductions would be approx $Rs 1,70,000 crore,” said an industry expert, requesting anonymity. Chaturvedi said the government would review the duties every two weeks depending on the oil price situation. Gasoline has been kept outside the export tax for the time being.
On the export front, customs duties were imposed on diesel $21.5 liters and ATF at $29.5 liters to discourage exports. India is a major refining hub, with companies such as Reliance Industries importing crude oil, refining it and exporting fuel.
Reliance shares closed 4.60% lower at $1,348.10 apiece on Friday, even as the BSE Sensex fell 2.25% to 73,583.22 points.
Joint Secretary of the Ministry of Petroleum, Sujata Sharma, said that all refineries have been mandated to divert 50% of exported petrol and 30% of exported diesel to the domestic market, to ensure availability is not tightened further amid global supply disruption.
“The reduction in customs duties is not only a relief for oil companies but also for consumers. Unless the government grants duty relief, oil manufacturers will be forced to raise prices due to rising global oil prices,” said MS Mani, Partner, Deloitte India.
The pressure on OMCs is already evident in the market. Private oil refiner Nayara Energy – the country’s largest private fuel retailer with more than 7,000 pumps – on Thursday raised gasoline prices by $5 liters and diesel in it $3, becoming the first oil marketing company to review motor fuel prices since the start of the conflict, HT reported. IOC, BPCL and HPCL, which together hold over 90% of the retail market across nearly 101,470 outlets, have no such flexibility.
Puri framed Friday’s decision as citizen-focused steps. “The Modi government had two options – either increase prices significantly for the citizens of Bharat as all other countries did or bear the brunt on its finances so that Indian citizens are insulated from international fluctuations,” he said, crediting Prime Minister Narendra Modi for choosing to absorb the cost.
The opposition Congress said that the tariff adjustments were made with an eye on the upcoming House of Representatives elections. Congress leader Jairam Ramesh said on Channel
