Union govt hikes excise duty on petrol, diesel as oil prices crash in global market

The Union government, on April 7, announced that it has increased excise duty on petrol and diesel by Rs 2 each, with effect from April 8, but there will be no increase in the retail prices of the two fuels, the Ministry of Petroleum and Natural Gas said.

The lower crude oil prices is reprtedly aimed at reducing the cost of production for oil refining and marketing companies such as Indian Oil and Bharat Petroleum and increase their retail margins. This will enable the Union government to raise more revenue from an excise duty hike without increasing the burden on consumers, according to the the Ministry of Petroleum and Natural Gas.

"The PSU Oil Marketing Companies have informed that there will be no increase in retail prices of petrol and diesel, subsequent to the increase effected in Excise Duty Rates today," the Ministry of Petroleum and Natural Gas said in a statement.

The excise duty on petrol has been increased to Rs 13 per litre and that on diesel to Rs 10, according to the Union goverment's order. The move reportedly aims to mop up more revenue as crude oil prices have fallen to a four-year low in the global market with the benchmark Brent crude falling to USD 63 a barrel--the lowest since April 2021--and the US West Texas Intermediate crude declining to USD 59.57.

India is the world’s 3rd largest importer of crude. Oil prices extended losses on April 7, falling close to 4% as growing trade tensions between the United States and China triggered fears of a recession that would lead to a decline in the demand for crude, while the OPEC+ oil companies has decided to increase supply.

Brent futures lost USD 2.43, or 3.7%, to USD 63.15 a barrel and US West Texas Intermediate crude futures were down 3.9%, at USD 59.57. Saudi Arabia, the world's top oil exporter, on April 6, slashed crude oil prices for Asian buyers in May by up to USD 2.3 per barrel.