India cuts fuel duties to curb inflation amid oil price surge

India has reduced excise duties on petrol and diesel in an effort to shield consumers from rising fuel prices and

India has reduced excise duties on petrol and diesel in an effort to shield consumers from rising fuel prices and contain inflationary pressures triggered by volatility in global oil markets.

Under a government order issued late Thursday, the excise duty on petrol has been lowered from 13 rupees to 3 rupees per litre, while the duty on diesel has been cut from 10 rupees to zero. The move comes as international crude oil prices have surged past the $100 per barrel mark amid heightened geopolitical tensions linked to the ongoing conflict involving Iran.

Officials said the decision is aimed at easing the burden on consumers and limiting losses faced by domestic oil marketing companies, which have been absorbing higher global costs without fully passing them on to retail prices.

In addition to the duty cuts, the government has introduced windfall taxes on fuel exports. Export duties have been set at 21.5 rupees per litre for diesel and 29.5 rupees per litre for aviation turbine fuel. The measures are intended to ensure adequate domestic supply of fuel products while discouraging excessive exports during a period of tight global supply.

The policy shift comes at a time when disruptions around the Strait of Hormuz have contributed to uncertainty in global energy markets. The strategic waterway plays a critical role in transporting a significant portion of the world’s oil, and any disruption has direct implications for importing nations like India.

India, one of the world’s largest oil importers, relies heavily on crude imports to meet domestic demand. A substantial share of its energy needs is sourced from the Middle East, making it particularly sensitive to fluctuations in global supply chains.

Economists have cautioned that while the tax reductions may provide short-term relief to consumers, they could also impact government revenues significantly. Estimates suggest that the fiscal cost of the move could be substantial, as the government absorbs a portion of the rising global price burden.

The announcement also comes ahead of upcoming elections in several regions, where fuel prices remain a key issue for voters. Authorities have emphasized that ensuring stable fuel availability and controlling price spikes remain top priorities as global market conditions remain uncertain.