India cuts petrol and diesel excise duties as oil prices surge

Summary

India has reduced excise duties on petrol and diesel to ease inflation pressures.
The government also imposed export taxes to secure domestic fuel supply amid rising oil prices.

NEW DELHI, March 27, 2026 — India has reduced excise duties on petrol and diesel as global crude prices climb, while introducing export taxes on refined fuels to manage domestic supply and inflation.

The move comes as oil prices have risen above $100 per barrel, driven by supply disruptions linked to tensions involving Iran and concerns around the Strait of Hormuz, a key route for about 40% of India’s crude imports.

According to a government order issued late Thursday, the finance ministry cut the special excise duty on petrol to 3 rupees per litre from 13 rupees, while the duty on diesel was reduced to zero from 10 rupees per litre.

The government did not disclose the fiscal cost of the decision. However, Hardeep Singh Puri said the state had absorbed a significant revenue impact to offset losses faced by oil marketing companies, estimated at around 24 rupees per litre for petrol and 30 rupees per litre for diesel at current global prices.

Economist Madhavi Arora estimated the annual fiscal impact at about 1.55 trillion rupees, noting that the duty cuts could absorb 30% to 40% of oil marketing companies’ annual losses on auto fuels.

Financial markets reacted quickly. Yields on 10-year government bonds rose by 7 basis points to 6.95%, the highest level in 20 months.

Shares of state-run refiners, including Bharat Petroleum Corporation and Hindustan Petroleum Corporation, gained more than 4% at market open before trimming advances later in the session.

While fuel prices in India are officially deregulated, companies do not always fully pass on increases in crude costs to consumers, particularly during periods of volatility.

Windfall tax on exports

The government also imposed a windfall tax of 21.5 rupees per litre on diesel exports and 29.5 rupees per litre on aviation turbine fuel exports.

Between April 2025 and January 2026, India exported 14 million metric tons of gasoline and 23.6 million tons of gasoil. While most state-run refiners have reduced exports, Reliance Industries remains the country’s largest fuel exporter.

Finance Minister Nirmala Sitharaman said the export taxes are aimed at ensuring adequate domestic fuel availability.

India, the world’s third-largest oil importer and consumer, relies heavily on imports for its energy needs. The country consumed 33.15 million metric tons of cooking gas last year, with imports accounting for about 60% of demand, nearly 90% of which came from the Middle East.

Prime Minister Narendra Modi said the government has taken steps to maintain supply stability, including ensuring availability of fertilisers and coal to meet rising demand.

Why this matters

• Helps cushion consumers from rising fuel prices and inflation pressures
• Highlights fiscal trade-offs as the government absorbs revenue losses
• Aims to secure domestic fuel supply through export controls
• Reflects India’s exposure to global energy market volatility

FAQs

Q1: Why did India cut excise duties on fuel?

To reduce the impact of rising global oil prices on consumers and control inflation.

Q2: What are the new duty rates?

Petrol duty is now 3 rupees per litre, while diesel duty has been reduced to zero.

Q3: What export taxes were introduced?

Diesel exports are taxed at 21.5 rupees per litre, and aviation fuel exports at 29.5 rupees per litre.

Q4: What is the fiscal impact of this move?

Economists estimate an annual impact of around 1.55 trillion rupees.

Q5: Why are global oil prices rising?

Supply disruptions linked to geopolitical tensions, including risks around the Strait of Hormuz.