New Delhi, March 27 The government has reduced excise duty on petrol to Rs 3 per litre and exempted diesel from the duty, aiming to protect consumers from the impact of rising global crude prices amid the ongoing conflict in the Middle East.
Global crude prices have increased by almost 50 per cent since the United States and Israel launched military strikes against Iran on February 28, triggering a strong response from Tehran.
In a notification issued late on March 26, the Finance Ministry reduced the excise duty to Rs 3 per litre, from Rs 13 per litre earlier, while the levy on diesel has been reduced to zero from Rs 10 earlier. The duty cuts are effective immediately, the ministry said.
Despite the increase in international prices, retail pump rates have remained unchanged, putting a strain on the finances of oil companies.
To provide relief to oil companies, the government has reduced excise duty on petrol and diesel.
Following the notification on the excise duty cut, shares of fuel retailers IOC, BPCL, and HPCL opened higher on the BSE.
Rating agency ICRA, in a note on Thursday, had said that if the average crude oil price goes up to USD 100-105/bbl, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel, respectively.
ICRA had also said that the government may reduce excise duty rates on petrol and diesel to keep retail sale prices stable at existing levels, giving oil companies more room to collect additional revenue to compensate for refining losses.
International oil prices touched USD 119 per barrel earlier this month due to the intensifying Iran conflict, before falling back to around USD 100 per barrel.
India imports 88 per cent of its crude oil needs and roughly half of its natural gas requirement. These mainly come through the Strait of Hormuz.
Following the US and Israeli attacks on Iranian government, military, and nuclear facilities, Iran warned against shipping through the strait, and insurers withdrew coverage, effectively halting tanker movements.
Nayara Energy, which operates 6,967 of India's 102,755 petrol pumps, has decided to pass on some of the increase in input costs to consumers and has raised petrol prices by Rs 5/litre and diesel by Rs 3/litre. Petrol at Nayara pumps now costs Rs 100.71 per litre and diesel costs Rs 91.31 per litre.
Jio-bp, the fuel retailing joint venture of Reliance Industries and BP Plc that owns 2,185 outlets, has, however, not yet raised prices despite incurring heavy losses on the sale of petrol and diesel.
State-owned fuel retailers, who control about 90 per cent of the market, continue to keep rates frozen. A litre of normal petrol in Delhi continues to cost Rs 94.77, while the same grade diesel comes for Rs 87.67 per litre.