The Government of India has reduced excise duty by ₹10 per litre on petrol and diesel with immediate effect following a sharp rise in global crude prices. The move, announced amid a surge from about $70 to $122 per barrel in March 2026, is aimed at supporting state-run oil companies while keeping retail fuel prices unchanged. The decision follows disruptions linked to conflict in West Asia and seeks to ensure supply stability across India. The policy also includes a new export levy on diesel.

The price on the fuel pump did not move. Behind the scenes, the economics shifted sharply.

India’s decision to cut excise duty on petrol and diesel by ₹10 per litre comes at a moment when global crude prices have climbed rapidly, reshaping fuel markets across continents. Over the past month, benchmark crude rose from roughly $70 to $122 per barrel, a jump of nearly 75 percent driven by supply disruptions linked to tensions in West Asia.

For Indian consumers, the immediate impact is stability. Retail prices remain unchanged. For the country’s oil marketing system, the change is more consequential.

Fuel excise cut offsets mounting OMC under recoveries

The excise reduction is not being passed on as a price cut at petrol pumps. Instead, it directly reduces the financial burden carried by public sector oil marketing companies.

These companies, including Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, have continued supplying fuel at prices below their cost of procurement.

At current international levels, under recoveries are estimated at about ₹26 per litre on petrol and ₹81.90 per litre on diesel. The combined daily loss absorbed by these firms is around ₹2,400 crore.

The ₹10 per litre excise cut offsets a portion of these losses, easing pressure on company balance sheets while allowing retail prices to remain steady.

This approach shifts the fiscal burden from consumers to the government. Lower excise collections reduce revenue, but they prevent a direct pass-through of global price volatility to households and businesses.

Global fuel price surge and India’s price stability strategy

Fuel prices have risen sharply in many parts of the world since the latest oil shock began. According to government data, prices have increased by 30 to 50 percent across South and South-East Asia, about 30 percent in North America, and roughly 20 percent in Europe.

India has diverged from that trend by holding retail prices steady, a strategy that relies on a combination of tax adjustments and loss absorption by public sector companies.

The policy reflects a broader approach seen during earlier global disruptions, including the period following the Russia Ukraine conflict 2022, when similar measures were used to limit domestic price increases.

Minister for Petroleum and Natural Gas Hardeep Singh Puri said the government faced a choice between raising prices or absorbing the impact.

“The 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 the Indian citizen is insulated from international volatility,” Puri said.

He added that the decision was taken to reduce the losses faced by oil marketing companies during a period of elevated global prices.

Diesel export levy introduced to secure domestic supply

Alongside the tax cut, the government has introduced an export levy on diesel. The measure aims to discourage refiners from diverting supply to international markets where prices are currently higher.

By prioritizing domestic availability, the policy seeks to ensure that fuel supplies at Indian pumps remain uninterrupted despite global market pressures.

The move reflects a balancing act between commercial incentives and domestic energy security. High global prices can make exports more attractive for refiners, but reduced domestic supply could lead to shortages or price spikes within the country.

India’s latest intervention underscores the scale of the current oil shock and its ripple effects across national economies. By absorbing part of the impact through fiscal measures, the government is attempting to stabilize both supply and pricing in a volatile global environment.