Petrol, Diesel Excise Duty: In a significant decision to keep the petrol and diesel prices under control amid soaring crude prices in the global market, the government on Friday slashed excise duty on petrol and diesel by Rs 10 per litre each, bringing the tax down to Rs 3 per litre on petrol and eliminating it on diesel.

The move comes amid a sharp surge in global crude oil prices, which are now trading near $110 per barrel—driven by escalating tensions on ongoing war between the US, Iran and Israel. The crude prices remain volatile this month amid energy supply disruption through strait of Hormuz, a key trade route in the Persian Gulf.

Retail Petrol, Diesel Prices May Remain Unchanged

However, the sharp decline in the excise duty is unlikely to offer immediate relief to consumers, as petrol and diesel prices remain unchanged.

The decision is primarily aimed at easing the financial burden on state-run oil marketing companies such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) by providing them space to absorb rising input costs to keep the retail prices stable.

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Brent Crude is trading in a range of $108-$110 on Friday, up significantly from the $102-104 level earlier this week. America's tussle to fully open up the Strait of Hormuz is not showing any productive signs, as Iran does not lower its stand on trade through the route. 

Amid all these uncertainties, the reduction in excise duty came as a big boost for oil marketing companies to manage the retail petrol-diesel prices at the current level.  

Crude Remains Highly Volatile

The Oil Marketing Companies did not hike retail fuel prices despite the sudden hike in crude prices this month---above $100 per barrel from a level of $60-$65 last month--since the war broke out on February 28.

Oil marketing companies (OMCs) have been effectively covering losses to maintain price stability amid the global crisis.

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After crude oil prices surged by almost 50 per cent since late February, they briefly touched $119 a barrel and then fell to around $100. This situation has been a disadvantage for India, which imports more than 85 per cent of its crude oil requirements.