Centre Raises Excise Duty on Petrol, Diesel by ₹2/Litre

Rapid Summary

• Excise Duty Hike: The central government has raised the excise duty on petrol and diesel by ₹2 per litre, effective April 8, 2025. Excise on petrol now stands at ₹13/litre, while diesel is taxed at ₹10/litre.
• Impact on Retail Prices: Industry insiders and PSU oil marketing companies (OMCs) assert that retail prices for petrol and diesel are unlikely to increase.This is due to declining international crude oil prices offsetting the hike.
• Revenue Implications: The move is expected to generate additional revenue for the Center without directly burdening consumers at fuel pumps.
• Oil Company Margins: OMCs will absorb the cost of the duty hike, possibly affecting their financial margins rather than passing costs onto consumers.
• Background Context: In December 2024, the windfall tax was removed amid falling global oil prices.

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Indian Opinion Analysis

The increase in excise duty reflects a strategic approach by the government to bolster fiscal resources while leveraging favorable global crude price trends to shield consumers from additional financial strain. By opting not to raise retail prices despite higher taxes, oil marketing companies face a squeeze in margins-potentially impacting profitability in an already competitive sector.

This policy decision highlights India’s reliance on indirect taxation for revenue generation but raises questions about its potential long-term impact on state-run OMCs and market dynamics. Amid fluctuating crude oil rates globally, this measured stance may temporarily avoid public criticism over fuel price inflation but could set precedents regarding fiscal strategy during low-price scenarios.

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