India Cuts Fuel Duties, Imposes Export Taxes Amid Oil Market Turmoil

India has reduced excise duties on petrol and diesel in an effort to contain inflationary pressures triggered by volatility in global oil markets. At the same time, the government has imposed new taxes on the export of diesel and aviation fuel.

The move follows a sharp rise in global oil prices after a joint military strike by the United States and Israel on Iran on February 28, which effectively disrupted traffic through the Strait of Hormuz. As a result, crude oil prices have surged above $100 per barrel. India imports nearly 40% of its crude oil through this critical shipping route.

In an order issued on thursday night, India’s Ministry of Finance slashed the excise duty on petrol from 13 rupees per litre to 3 rupees. Similarly, the duty on diesel has been reduced from 10 rupees per litre to zero.

The government has not disclosed the total revenue loss from the tax cuts. However, the decision comes at a politically sensitive time, with election campaigns underway in four states and one union territory. Fuel prices are known to significantly influence voter sentiment in India.

Oil Minister Hardeep Singh Puri stated on social media platform X that due to high international prices, oil marketing companies are currently incurring losses of about 24 rupees per litre on petrol and 30 rupees per litre on diesel. The tax reductions are expected to offset part of these losses.

According to Madhavi Arora, an economist at Emkay Global Financial Services, the annual revenue loss from the tax cuts could reach approximately 1.55 trillion rupees. She added that the move may reduce 30–40% of the annual losses faced by oil marketing companies at current price levels.

India’s state-owned fuel retailers, which control about 90% of the domestic market, do not always pass on global price increases to consumers. As a result, the burden of rising costs is often shared between the government and the companies, providing some relief to consumers.

Export Duties Introduced

In a parallel move, the government has imposed export duties of 21.5 rupees per litre on diesel and 29.5 rupees per litre on aviation turbine fuel.

Between April last year and January this year, India exported 14 million metric tonnes of petrol and 23.6 million tonnes of diesel. Currently, most refineries have paused fuel exports. The country’s largest exporter in this sector is Reliance Industries.

Finance Minister Nirmala Sitharaman said the government will ensure there is no shortage in the supply of petrol, diesel, and jet fuel. She added that support will be extended to oil marketing companies to prevent price hikes for consumers and to stabilize aviation fuel costs.

India, the world’s third-largest oil importer, remains heavily dependent on imported energy.

Meanwhile, the Ministry of Petroleum has indicated that supplies of liquefied petroleum gas (LPG) to commercial and industrial sectors will be increased by 20%, bringing total supply to about 70% of pre-crisis levels.