Government Reduces Excise Duty on Fuel Amid Rising Oil Prices

In a recent move, the Indian government has reduced excise duty on petrol and diesel by Rs 10 per litre each. However, retail prices will remain unchanged as refiners adjust for increased input costs. This decision comes in light of a significant rise in international oil prices, which have surged nearly 50% in the past month. The government aims to prevent a price hike at the pump while reinstating export duties on diesel and aviation fuel. Despite these changes, fuel prices in India have remained stable since April 2022, contrasting with sharp increases seen in other regions. This article explores the implications of these adjustments on consumers and the economy.

By Narendra Chaudhary Mar 28, 2026, 10:11 IST

Excise Duty Reduction on Petrol and Diesel

New Delhi, March 28: The central government has announced a reduction in excise duty on petrol and diesel by Rs 10 per litre for both fuels. However, retail prices will not change as refiners will adjust the reduction against increased input costs.

This decision prevents a necessary hike in petrol and diesel prices, which had been prompted by a nearly 50% surge in international oil prices over the past month.

The special additional excise duty on petrol has been decreased from Rs 13 to Rs 3 per litre, while the duty on diesel has been eliminated from Rs 10. Despite this reduction, retail prices at the pump will remain stable due to anticipated fuel losses, which Petroleum Minister Hardeep Singh Puri estimates at Rs 24 per litre for petrol and Rs 30 for diesel, with his ministry suggesting figures of Rs 26 and Rs 81.90, respectively.

In addition, the government has reinstated an export duty of Rs 21.50 per litre on diesel and Rs 29.50 per litre on aviation turbine fuel (ATF), a measure first introduced in July 2022 to limit excessive profits by refiners following the Russian invasion of Ukraine, which was later removed in December 2024.

Unlike the previous instance, there is currently no windfall tax imposed on domestically produced crude oil from companies such as ONGC.

Crude oil prices, which are essential for producing petrol and diesel, have escalated from approximately USD 70 per barrel prior to the Middle East conflict to over USD 100, according to Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas.

"The government faced two choices: either pass the cost increase onto consumers through higher petrol and diesel prices or absorb the impact by reducing excise duty. The government opted for the latter," she stated during a press briefing.

CBIC Chairman Vivek Chaturvedi noted that the windfall tax on exports is expected to generate around Rs 1,500 crore in the first two weeks, while the excise duty cut will result in a revenue loss of over Rs 7,000 crore for the government.

Fuel prices in India have remained relatively stable since April 2022, despite various geopolitical events, including the Russia-Ukraine conflict and the Middle East crisis, which have caused significant fluctuations in global oil prices. India relies on imports for 88% of its crude oil requirements.

In contrast, fuel prices have surged by 30-50% in South and Southeast Asian nations, 30% in North America, and 20% in Europe since the current crisis began.