The excise duty on petrol and diesel was increased by ₹2 per litre each, effective April 8, 2025. The new rates are ₹13 per litre for petrol and ₹10 per litre for diesel, up from ₹11 and ₹8 per litre, respectively, according to the Ministry of Petroleum and Natural Gas website.
Will this excise duty hike increase petrol and diesel prices at the pump?
No, the retail prices of petrol and diesel are not expected to rise immediately, as the Ministry of Petroleum and Natural Gas has stated that public sector oil marketing companies (OMCs) will absorb the hike, offsetting it against a potential reduction in retail prices due to lower international oil prices, as reported by CNBC-TV18. In fact, Oil Minister Hardeep Singh Puri even said that retail fuel relief is likely if international crude oil prices drop below $65 per barrel.
Who receives the revenue from this excise duty hike?
The revenue from the excise duty hike goes to the central government and is collected by the Department of Revenue under the Ministry of Finance. It contributes to the national exchequer, funding various public expenditures such as infrastructure, healthcare, and subsidies.
Why was the excise duty increased?
With global crude oil prices softening recently and the windfall profit tax on petroleum products removed in December 2024, the government is leveraging the duty increase to offset potential revenue losses, particularly through the subsidy on domestic cooking gas, while avoiding direct retail price hikes for consumers.
OMCs face LPG under-recoveries to the tune of ₹42,000 crore in FY25, according to CNBC-TV18. Today’s increase in excise duty on petrol and diesel by ₹2 each, along with a ₹50 hike in LPG cylinder prices, will aid OMCs in cutting losses per cylinder down from ₹250 to ₹200.
What is the retailer’s margin on petrol and diesel after this hike?
The retailer’s margin, or dealer commission, is set by public sector oil marketing companies (OMCs) such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum. As of early 2025, this margin is approximately ₹3.50 to ₹4 per litre for petrol and ₹2.50 to ₹3 per litre for diesel, depending on location and company policy. The excise duty hike does not directly affect this margin, as OMCs have indicated they will absorb the ₹2 increase rather than passing it on to retail prices immediately.
Why did the government increase the excise duty?
The hike comes amid fluctuating global oil prices, which have recently dropped. The increase is likely aimed at boosting government revenue, especially following the removal of windfall profit taxes on crude oil and petroleum exports in December 2024. It may also reflect a strategy to maintain fiscal stability without passing the burden directly onto consumers.
