Indian Government Increases Excise Duty on Petrol and Diesel

The Indian government on April 7 announced an increase of Rs 2 per litre in the Special Additional Excise Duty (SAED) on both petrol and diesel. The revised rates came into effect on April 8, with the SAED on petrol rising from Rs 11 to Rs 13 per litre and the SAED on diesel rising from Rs 8 to Rs 10 per litre.

Despite the excise duty hike, the Ministry of Petroleum and Natural Gas was quick to clarify that the retail prices of petrol and diesel will remain unchanged. This assurance was made directly by Oil Minister Hardeep Singh Puri in a subsequent press conference, who made it clear that the tax would not be passed on to consumers.

Puri spoke about concerns about a possible increase in oil prices and stressed that the government is absorbing the increased taxes. He pointed out that the recent weakness in international crude oil prices, which have fallen to around $60 per barrel, was a key factor in the decision.

However, the minister also pointed out that state-run oil marketing companies (OMCs) currently hold stocks at an average price of $75 per barrel as they usually maintain stocks for more than 45 days. This means that while the direct impact on consumers is offset, OMCs' margins may face some pressure in the near term.

The decision to increase the excise tax comes at a time when global crude oil prices are on a downward trend. The oil price crash was caused by increased non-OPEC supply and weakening global demand, and the trade tensions caused by the US tariffs further exacerbated the oil price crash.

Brent crude futures fell $2.23, or 3.4%, to $63.35 a barrel, hitting the lowest level since April 2021. Similarly, U.S. West Texas Intermediate crude futures fell $2.22, or 3.58%, to $59.77. Both Brent and WTI crude oil fell sharply in the past week, falling 10.9% and 10.6%, respectively.