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Why did India cut excise duty on petrol, diesel amid West Asia conflict? Government explains
According to the minister, the government had only two choices: either increase fuel prices or bear the financial brunt so that Indian citizens are insulated.
Union Petroleum Minister Hardeep Singh Puri on Friday explained the rationale behind the Indian government cutting the special excise duty on petrol and diesel amid the raging conflict in West Asia.
According to the union minister, the Narendra Modi government had only two choices: either increase fuel prices or bear the financial brunt so that Indian citizens are insulated. Follow the LIVE coverage of the impact of the West Asia conflict here.
“International crude prices have gone through the roof in the last 1 month, from around 70 dollars/barrel to around 122 dollars/barrel. Consequently, petrol and diesel prices for consumers have gone up all over the world. Prices have increased by around 30%-50% in Southeast Asian countries, 30% in North American countries, 20% in Europe and 50% in African countries. The Modi Government had two choices- either increase prices drastically for citizens of Bharat as all other nations have done or bear the brunt on its finances so that Indian citizen is insulated from international volatility,” Puri explained in a post on X.
“Hon’ble Prime Minister @narendramodi Ji, in keeping with his Government’s commitment of the last 4 years since the conflict in Russia-Ukraine started, decided to take a hit on its own finances again to safeguard the Indian citizen,” he added.
Puri said that the government has taken a huge hit to its tax revenues to ensure that oil companies' very high losses (approximately Rs. 24/litre for petrol and Rs. 30/litre for diesel) are reduced amid sky-high international prices.
“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. My gratitude to Hon’ble PM Narendra Modi Ji and Hon’ble FM @nsitharaman Ji for this very timely, bold and visionary decision!” he wrote.
Finance minister speaks out
Union finance minister Nirmala Sitharaman also spoke out on the government's decision, saying that the central excise duty on petrol and diesel for domestic consumption has been reduced by ₹10 per litre each in view of the West Asia crisis, which will “provide protection to consumers from a rise in prices.”
“Hon. PM @narendramodi has always ensured that citizens are protected from vagaries of supply and costs of essential goods. Further, duties have been imposed on exports of Diesel at ₹21.5 per litre and on ATF at ₹29.5 per litre. This will ensure adequate availability of these products for domestic consumption. The Parliament has been notified about the same,” she wrote in an X post.
The tax cut decision
Hardeep Puri's explanation comes just after the government of India cut the special additional excise duties (SAED) on petrol and diesel, in a move seemingly aimed at reducing oil companies' losses.
In a government order on Thursday, the finance ministry reduced the special excise duty on petrol to ₹3 per litre from ₹13 earlier. It also cut the duty on diesel to zero from ₹10.
The notification comes amid supply disruptions due to the ongoing US-Iran war. “…the Central Government, being satisfied that it is necessary in the public interest so to do…,” reads a part of the order.
The changes were notified through amendments to the central excise rules and duty structures, which “shall come into force with immediate effect,” as per the Gazette notification. It is unlikely to have any immediate impact on pump prices.
On aviation turbine fuel (ATF), the order states: “Aviation Turbine Fuel Rs. 50 per Litre” as special additional excise duty, alongside exemptions that cap the effective rate at “Rs. 29.5 per litre” in certain cases.
