**Executive Summary**
Effective March 27, 2026, the Government of India reduced excise duty on petrol and diesel by Rs 10 per litre to mitigate the impact of international crude prices surging to USD 122 per barrel. This measure is designed to offset the significant under-recoveries faced by public sector Oil Marketing Companies (OMCs) rather than reducing retail pump prices. Additionally, an export levy on diesel has been introduced with immediate effect to prioritize domestic supply over international exports.
**Key Points / Main Content**
**Excise Duty and Retail Pricing**
* Excise duty on both petrol and diesel is reduced by Rs 10 per litre with immediate effect.
* Retail pump prices will remain stable; the duty reduction is not being passed to consumers as a price cut.
* The reduction serves to partially offset the "under-recoveries" (losses) absorbed by OMCs, which currently stand at Rs 26 per litre for petrol and Rs 81.90 per litre for diesel.
**Global Oil Market Context**
* International crude prices rose by nearly 75% in less than four weeks, climbing from USD 70 to USD 122 per barrel due to conflict in West Asia.
* While global fuel prices in other regions have risen by 20% to 50%, the Indian government has opted to maintain price stability at a significant fiscal cost.
**Domestic Supply and Export Controls**
* A new export levy has been introduced on diesel to disincentivize international sales.
* The government has mandated that refinery output must be directed toward meeting domestic demand as a priority over commercially attractive export opportunities.
**OMC Financial Health**
* Public sector OMCs (IOCL, BPCL, and HPCL) are currently absorbing a combined daily under-recovery of approximately Rs 2,400 crore.
* The excise reduction of Rs 10 per litre is intended to ensure OMCs can continue operations and fuel supply without disruption.
**Impact Analysis**
**Oil Marketing Companies (IOCL, BPCL, HPCL)**
**Impact**
They receive immediate financial relief as the excise reduction offsets Rs 10 per litre of their current under-recovery losses.
**Action Required**
Must maintain a continuous and undisrupted supply of fuel to the domestic market despite high international procurement costs.
**Indian Consumers and Citizens**
**Impact**
Consumers are insulated from the extreme volatility of global oil prices, with retail pump prices remaining unchanged despite a 75% surge in crude costs.
**Action Required**
No specific action required; benefits from price protection and supply stability.
**Fuel Exporters and Refineries**
**Impact**
The introduction of an export levy reduces the profit margins on diesel exports, making domestic supply the more viable primary option.
**Action Required**
Must prioritize refinery output for the domestic market and comply with the new export levy regulations.
**Government of India**
**Impact**
The government incurs a substantial hit to its taxation revenues and bears the fiscal brunt of the international energy crisis.
**Action Required**
Must continue to monitor the evolving global energy situation and take necessary measures to ensure ongoing supply stability and price protection.
Key Entities Referenced
Excise Duty: The central tax on petrol and diesel, which was reduced by Rs 10 per litre to offset oil company losses and maintain stable retail pump prices.
Oil Marketing Companies (OMCs): Public sector entities (IOCL, BPCL, and HPCL) responsible for domestic fuel supply that absorb under-recoveries caused by global oil price shocks.
Export Levy: A regulatory tax introduced on diesel exports to ensure domestic supply takes precedence over international sales during periods of high global prices.
Ministry of Petroleum & Natural Gas: The primary government body overseeing the reduction of fuel taxes and monitoring global energy situations to ensure domestic supply stability.
Ministry of Petroleum & Natural Gas
Government Slashes Excise Duty on Petrol and
Diesel to Shield Consumers and OMCs from
Global Oil Shock
Retail Pump Prices Remain Stable; OMC Under-Recovery
Partially Offset
Posted On: 27 MAR 2026 2:36PM by PIB Delhi
The Government of India has reduced excise duty by Rs 10 per litre on both petrol and diesel with
immediate effect. This decision has been taken in response to the steep and rapid rise in international
crude oil prices, which have surged from approximately USD 70 per barrel to around USD 122 per barrel
over the past month — an increase of nearly 75 per cent in under four weeks, driven by the ongoing
conflict in West Asia and associated disruptions to global energy supply chains.
Retail pump prices of petrol and diesel will not change. The excise reduction is not being passed on as
a price cut at the pump. Instead, it directly reduces the under-recoveries being absorbed by public sector
oil marketing companies (OMCs) — Indian Oil Corporation, Bharat Petroleum Corporation and
Hindustan Petroleum Corporation — who have continued to supply fuel to Indian consumers at prices
well below their cost of supply. At current international crude prices, under-recoveries stand at
approximately Rs 26 per litre on petrol and Rs 81.90 per litre on diesel. The combined daily under-
recovery being absorbed by OMCs is approximately Rs 2,400 crore. The excise reduction offsets Rs 10
per litre of these losses, ensuring OMCs can continue to supply fuel without disruption while keeping
retail prices unchanged.
The contrast with global fuel markets is instructive. Fuel prices have risen by 30 to 50 per cent across
South and South-East Asian countries, 30 per cent in North America, and 20 per cent in Europe since the
onset of the current crisis. India has held the line. That stability carries a fiscal cost, and the Government
has chosen to bear it.
The Minister for Petroleum and Natural Gas, Shri Hardeep Singh Puri, stated:
“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. Honourable Prime Minister Shri Narendra Modi Ji
decided to take a hit on Government finances to safeguard the Indian citizen. The
Government has taken a substantial impact on its taxation revenues to reduce the high
losses being faced by oil marketing companies at this time of sky-high international
prices.”
Alongside the excise reduction, the Government has simultaneously introduced an export levy on diesel.
At a time when international diesel prices have surged sharply, the levy is designed to disincentivise
exports and ensure that refinery output is directed first towards meeting domestic demand. Keeping Indianpumps fully supplied takes precedence over export opportunities, however commercially attractive those
may be at current global prices.
This decision is consistent with the approach adopted since the Russia-Ukraine conflict of 2022, when
OMCs absorbed sustained losses and the Government cut central taxes to shield households and
businesses from global price volatility. The same principle governs today’s intervention: India’s citizens
and industry should not bear the cost of disruptions they did not cause. The Government will continue to
monitor the evolving global energy situation and take all measures necessary to maintain supply stability
and price protection for Indian consumers.
****
MN
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