In a swift late-night decision, the government cut excise duty on petrol and diesel to shield consumers from rising global oil prices triggered by Middle East tensions.
A late-night round of discussions at the highest level led to a sharp cut in fuel taxes, with the government stepping in to cushion the impact of surging global oil prices.
Officials familiar with the development said the decision was taken after reviewing the fast-changing situation in international energy markets, where supply concerns have pushed crude prices higher. The move, led by Narendra Modi, brings down excise duty on petrol to ₹3 per litre from ₹13, while diesel duty has been reduced to zero.
The timing of the decision is significant. Global oil markets have been under pressure due to geopolitical tensions in the Middle East, particularly around key supply routes. For India, which relies heavily on imported crude, such disruptions quickly translate into higher costs. Instead of allowing retail fuel prices to spike, the Centre chose to absorb part of the burden through lower taxes. Petroleum Minister Hardeep Singh Puri indicated that the government had limited options and decided to shield consumers rather than pass on the full impact.
However, the immediate benefit at fuel pumps may be limited. Oil marketing companies are currently dealing with elevated input costs, and a portion of the tax relief could be used to offset their losses instead of directly lowering retail prices. The decision also comes with a cost. Economists estimate a significant hit to government revenues, but officials appear willing to take that hit to prevent inflation from rising further.
Beyond consumer relief, the move reflects a broader strategy — maintaining fuel stability at a time when global uncertainty is high. Additional steps, including export duties on fuels, have also been introduced to ensure adequate domestic supply.
For now, the focus remains on stability. But with global oil prices still volatile, further policy moves cannot be ruled out.
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