India slashes additional excise duty on petrol, diesel amid fuel price hike worries — What does this mean for you?

The Indian government has slashed the special additional excise duty (SAED) on both petrol and diesel amid rising worries about fuel price hike across the country due to the US-Iran war in West Asia.

According to a gazette notification dated Thursday, the additional excise duty on petrol was cut to ₹3 per litre from ₹13 per litre earlier. Meanwhile, the excise duty on diesel was cut to ₹0 from ₹10 per litre earlier.

This comes at a time when concerns are skyrocketing about a possible fuel price hike amid the rising tensions in the Middle East due to the US-Iran war. The conflict has affected the global energy infrastructure as Iran has effectively imposed a blanket blockade on the key Strait of Hormuz — an arterial passage that is responsible for shipping 90% crude imports of India. The US-Iran war has also seen bombings and missile attacks on key crude infrastructure, using the Ras Laffan Industrial City in Saudi Arabia.

The move to cut petrol diesel excite duty is aimed at providing relief to the oil marketing companies as oil prices continue to trade above $100 per barrel amid the war in the Middle East.

The would reduce Centre's excise duty revenue collection but will protect state run oil retailers' books from the impact of crude oil price hike. The transmission of the reduction in the special levy to the retail fuel prices is unlikely. However, this move would reduce the pressure on the oil marketing companies and ease the need to raise pump prices of petrol and diesel.

The move comes a day after private refiner, Nayara Energy raised petrol and diesel prices by ₹5 and ₹3 per litre respectively. The state-run OMCs had raised the price of premium petrol by ₹2 and that of industrial diesel by ₹22 a litre.

Oil marketing companies since the start of the war have been facing under-recoveries and negative marketing margins.

According to a recent Emkay research report, with Brent crude hovering at $100–102 per barrel, India’s fuel pricing system is under acute strain. Oil marketing companies are absorbing annualised losses of nearly ₹3 trillion at prevailing crude price levels, while retail fuel prices would need to rise by as much as 43% for diesel and 19% for petrol to restore normal margins.

An Elara Capital report said: "OMCs are the hardest hit amid high-crude prices. Higher GRMs can partly offset retail margin collapse and rising LPG loss. At current Brent of $100/bbl, earnings could drop sharply 90-190% absent retail price hike, tax cut, or higher LPG subsidy. Among OMCs, HPCL & BPCL are most exposed due to their higher retail volume relative to refining capacity."

The move also enables the government to restrict the energy shock from Iran war fueling retail price inflation in the country.

Last week, the benchmark Brent crude reached a high of $119 per barrel. The May contract of Brent on the Intercontinental Exchange fell 1.06% to $106.87 per barrel. Similarly, May contract of West Texas Intermediate on the NYMEX was trading at $93.58 per barrel, lower by 0.95% from its previous close.

Prices fell amid hopes of de-escalation in the ongoing war in Iran after US president Donald Trump on Thursday said that talks with Iran are going "very well". Taking to the social media platform Truth Social, he said that the US would halt attacks on energy facilities of Iran till 8 PM Eastern Standard Time, 6 April.

As India imports 90% of its oil requirement the war in West Asia and the blockade of the Strait of Hormuz has a significant impact on India's economy. A $1 per barrel rise for a year can lead to a ₹16,000 crore increase in India's import bill.

In a report earlier this week, Goldman Sachs Global Investment Research said that India’s consumer price index (CPI)-based inflation is likely to be 4.6% this year, up from 4.2% estimated on 13 March. It further said that the India’s economy is likely to grow 5.9% in 2026, lower than the 6.5% estimated earlier this month.

Further, the government has also imposed special additional excise duties on exports of Diesel at ₹21.5 per litre and on ATF at ₹29.5 per litre. In a tweet, finance minister Nirmala Sitharman said: "This will ensure adequate availability of these products for domestic consumption. The Parliament has been notified about the same."

"In view of the West Asia crisis, the central excise duty on petrol and diesel for domestic consumption has been reduced by ₹10 per litre each. This will provide protection to consumers from rise in prices," she said.

Taking to X, Hardeep Singh Puri, union minister for petroleum and natural gas said that international crude prices have gone through the roof in the last one month from around $70 per barrel to around $122 per barrel and consequently, petrol and diesel prices for consumers have gone up all over the world.

"Government has taken a huge hit on it taxation revenues to ensure very high losses of oil companies (approximately 24 Rs/litre for petrol and 30 Rs/litre for diesel) at this time of sky high international prices 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," he said.

India is the fourth largest oil refiner in the world with 258 million tonne of annual refining capacity. The seventh largest exporter of petroleum products, India exported 65.1 million tonne of petroleum products in FY25 worth $44.4 billion. Reliance Industries, which owns and operates the largest integrated refinery complex in the world in Jamnagar, Gujarat is the major petroleum exporter from India. The spokesperson of RIL did not immediately respond to queries on the imposition of the levy on exports.

These windfall levies were last imposed in 2022 during the peak of the Russia-Ukraine war and were withdrawn in 2024.

What does the petrol, diesel excise duty cut mean for you?

The special additional excise duty cut on petrol and diesel by the government will be applicable to oil marketing companies. This does not necessarily mean that these companies will pass on the benefit to retail petrol rates and diesel rates.

This essentially means that even though the petrol, diesel excise duty has been cut by ₹10 per litre, it does not automatically mean that the retail rates of petrol and diesel will be slashed by oil marketing companies.

What is the petrol and diesel price today?

Oil marketing companies like Indian Oil, Hindustan Petroleum and Bharat Petroleum and others have not cut the petrol rates and diesel rates on Friday, 27 March despite the special additional excise duty cut.

Petrol rate in Delhi today is ₹94.77, while diesel price is ₹87.67 per litre, same as yesterday. Similarly, petrol and diesel price in other cities in India have also remained unchanged.