**Executive Summary**
This document is a response to unstarred question number 45 in the Lok Sabha, to be answered on January 29, 2026, regarding the rationalization of taxes and duties on fuels. It details the government's current policies and actions concerning petrol, diesel, LPG, and Aviation Turbine Fuel (ATF), including pricing mechanisms, tax adjustments, and subsidies. The response is provided by the Minister of State in the Ministry of Petroleum and Natural Gas, Shri Suresh Gopi.
**Key Points / Main Content**
* **Pricing of Petrol and Diesel:**
* Prices are market-determined by Public Sector Oil Marketing Companies (OMCs).
* Final selling prices include excise duty (Central Government) and VAT/taxes (State Governments).
* Prices vary across states due to freight rates and VAT/local levies.
* **Excise Duty Adjustments:**
* Central Government reduced excise duty in November 2021 (Rs. 13/litre on petrol, Rs. 16/litre on diesel).
* Excise duty was increased by Rs. 2 per litre on petrol and diesel in April 2025 but not passed on to consumers.
* Current excise duty is Rs. 21.90/litre (petrol) and Rs. 17.80/litre (diesel).
* **LPG Policies:**
* India imports approximately 60% of its LPG requirement, linking domestic prices to international rates.
* Domestic LPG prices were reduced by about 22% between August 2023 and January 2026.
* PMUY consumers' effective LPG price reduced by about 39% during the same period.
* Domestic LPG attracts a GST rate of 5%.
* Government provides targeted subsidy of Rs. 300/cylinder to PMUY consumers, resulting in an effective price of Rs. 553 per cylinder in Delhi.
* Government compensated OMCs for losses on domestic LPG: Rs. 22,000 crore in January 2023, and recently approved Rs. 30,000 crore.
* **Aviation Turbine Fuel (ATF):**
* Prices are market-determined since April 1, 2001.
* Excise duty is levied at 11%, but 2% for supply to Scheduled Commuter Airlines (SCA) from RCS airports.
* **Biofuel Promotion:**
* Government promotes alternate fuels like CNG, LNG, Hydrogen, biofuels, electric vehicles.
* National Policy on Biofuels - 2018 targeted 20% ethanol blending in petrol and 5% biodiesel blending in diesel by 2030.
* Target for 20% ethanol blending in petrol advanced to 2025-26.
* Average blending percentage of 19.24% achieved during Ethanol Supply Year (ESY) 2024-25.
**Impact Analysis**
**Consumers:**
* **Impact:** Affected by fuel prices, excise duty adjustments, LPG subsidies, and the availability of alternative fuels.
* **Action Required:** No specific action is required.
**Oil Marketing Companies (OMCs):**
* **Impact:** Determine petrol and diesel prices, experience losses/gains based on international LPG prices, receive compensation from the government.
* **Action Required:** No specific action is required.
**State Governments:**
* **Impact:** Set VAT/taxes on petrol and diesel, impacting the final selling price in their respective states.
* **Action Required:** No specific action is required.
**Petroleum and Natural Gas Sector:**
* **Impact:** Subject to rationalization of taxes and duties on fuels and inputs.
* **Action Required:** No specific action is required.
Key Entities Referenced
Goods and Services Tax (GST): A comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services throughout India, being considered for petroleum products.
Ministry of Petroleum and Natural Gas: The Indian government ministry responsible for the exploration, production, refining, distribution, marketing, import, export, and conservation of petroleum, natural gas, petrochemicals, and related products.
Oil Marketing Companies (OMCs): Public Sector Undertakings responsible for the marketing and distribution of petroleum products in India.
National Policy on Biofuels - 2018: A policy that specifies indicative targets for blending ethanol in petrol and biodiesel in diesel.
Ethanol Blended Petrol (EBP) Programme: A program to promote the use of biofuels by selling petrol blended with ethanol.
LOK SABHA
UNSTARRED QUESTION NO. 45
TO BE ANSWERED ON 29 JANUARY, 2026
Rationalisation of Taxes and Duties on Fuels
45. SHRI MANI A:
पेट(cid:332)ोिलयम और (cid:366)ाकृ ितक गैस मं(cid:361)ी
Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:
(a) whether the Government is aware that the petroleum and natural gas sector is seeking
rationalisation of taxes and duties on fuels and inputs citing high cumulative tax burden affecting
transport costs, manufacturing and household budgets, if so, the details thereof;
(b) whether the Government proposes to bring petrol and diesel under the Goods and Services
Tax (GST) regime to enable uniform taxation and input tax credit benefits, if so, the details
thereof;
(c) whether any measures are under consideration to rationalise taxes on natural gas, LPG and
aviation turbine fuel to support cleaner energy transition and industrial competitiveness, if so, the
details thereof; and
(d) the steps being taken to balance revenue considerations with the need to reduce energy costs
for consumers and key economic sectors?
ANSWER
पेट(cid:332)ोिलयम और (cid:366)ाकृ ितक गैस मं(cid:361)ालय म(cid:336) रा(cid:475) मं(cid:361)ी
((cid:373)ी सुरेश गोपी)
MINISTER OF STATE IN THE MINISTRY OF PETROLEUM AND NATURAL GAS
(SHRI SURESH GOPI)
(a) to (d): Prices of petrol and diesel are market determined and Public Sector Oil Marketing
Companies (OMCs) take appropriate decision on pricing of petrol and diesel. The final selling
prices of petrol and diesel include excise duty fixed by the Central Government and State Value
Added Tax (VAT)/Taxes fixed by the respective State Governments. The prices of petrol and
diesel in the States across the country vary due to differing freight rates, VAT/local levies etc.
Central Government uniformly decreased the prices across the country by reducing excise duty
in November 2021 and May 2022 of Rs. 13/litre and Rs. 16/litre on petrol and diesel
respectively.
Government have made fiscal interventions whenever necessary to calibrate the tax structure
applicable for petroleum products. In April 2025, excise duty on Petrol and Diesel was increased
by Rs. 2 per litre each but this was not passed on to consumers. Currently excise duty is levied at
Rs. 21.90 per litre and Rs. 17.80 per litre on petrol and diesel respectively.PSU OMCs have also carried out an intra-state freight rationalisation. This has benefitted
consumers located at remote areas, far from Petroleum Oil & Lubricants (POL) Depots in the
form of reduced Petrol and Diesel prices in remote parts within the states. This initiative has also
reduced the difference between the maximum and minimum retail prices of Petrol or Diesel
within a state.
The GST Council in its 45th meeting held on 17th September 2021 had considered the inclusion
of Petrol/Diesel and other petroleum products under the GST regime but the matter was deferred
by the Council.
As far as LPG is concerned, India imports about 60% of its LPG requirement and accordingly
prices of LPG in the country are linked to its prices in the international market. While the
average Saudi CP (international benchmark for LPG pricing) rose by 35% (from US$ 385/MT in
July 2023 to US$ 522/MT in January 2026), the prices of domestic LPG were reduced by about
22% (from Rs. 1103 in August 2023 to Rs. 853 in January 2026). For PMUY consumers,
effective price for domestic LPG has been reduced by about 39% (from Rs. 903 in August 2023
to Rs. 553 in January 2026). Currently, domestic LPG attracts a GST rate of 5%, one of the
lowest slabs of GST.
The retail selling price of a 14.2 Kg domestic LPG cylinder is currently Rs. 853 in Delhi. After a
targeted subsidy of Rs. 300/cylinder to PMUY consumers, Government of India is providing
14.2 Kg LPG cylinders at an effective price of Rs.553 per cylinder (in Delhi). This is available to
about 10.43 crore Ujjwala beneficiaries, across the country.
During the period 2020-21 to 2022-23, as the increase in international LPG prices was not fully
passed on in retail prices, the Oil Marketing Companies (OMCs) suffered significant losses on
domestic LPG. To compensate the OMCs for these losses, Government paid a one-time
compensation of Rs. 22,000 crore to OMCs in January 2023.
The international prices of LPG again went up during 2024-25 and continue to remain high.
However, to insulate consumers from fluctuations in international LPG prices, the increase in
cost was not passed on to consumers of domestic LPG which led to significant losses for the
three OMCs. To compensate the OMCs for these losses, Government has recently approved a
compensation of Rs. 30,000 crore to the OMCs.
As far as Aviation Turbine Fuel (ATF) is concerned, its pricesare market-determined with effect
from 01.04.2001. The excise duty is levied at 11% on Aviation Turbine Fuel (ATF). However,
Excise Duty is 2% in place of 11%, for supply to Scheduled Commuter Airlines (SCA) from the
regional connectivity scheme (RCS) airports.Government is committed towards security, affordability and accessibility of energy for every
citizen. To achieve these objectives Government is promoting usage of alternate fuels like CNG,
LNG, Hydrogen, biofuels including ethanol, electric vehicles, etc.
Government notified the National Policy on Biofuels - 2018 which laid out indicative target of
20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030 in the country.
Subsequently, Government advanced the target of 20% blending of ethanol in petrol from 2030
to 2025-26. During the ongoing Ethanol Supply Year (ESY) 2024-25, Public Sector OMCs have
achieved the average blending percentage of 19.24%. During the month of October, 2025,
Ethanol blending of 19.97% has been achieved.
To promote the use of biofuels, various programmes such as Ethanol Blended Petrol (EBP)
Programme, wherein Oil Marketing Companies (OMCs) sell petrol blended with ethanol,
Biodiesel blending programme wherein biodiesel is blended with diesel, Sustainable Alternative
towards Affordable Transportation (SATAT) initiative wherein Compressed Bio Gas (CBG) is
marketed along with Compressed Natural Gas (CNG) have been taken up.
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