India has eliminated key excise duty on petrol and diesel prices in India to shield refiners led by Indian Oil Corp. Ltd. from crude oil shocks emanating from the ongoing Iran war in West Asia.
In a series of late-night notifications, the Ministry of Finance announced that the special additional excise duty and additional excise duty on petrol have been cut to “nil”. For diesel, the government set the special additional excise duty at ₹18.5/litre and the additional excise duty at ₹3/litre.
These measures, effective immediately, arrive as Brent crude remains volatile near $100 a barrel, having recently touched peaks of $119 following military strikes on Iranian infrastructure. India, which imports ~88% of its crude oil, is seen as most vulnerable to the crisis in West Asia.
The effective closure of the Strait of Hormuz—a chokepoint for one-fifth of global oil consumption—has seen daily transits drop from 120 vessels to just a handful, leaving nearly 20 million barrels per day at risk.
However, India’s oil marketing companies—Indian Oil, Bharat Petroleum and Hindustan Petroleum—have absorbed the pain, maintaining a freeze on petrol and diesel prices to keep inflation in check. They are estimated to be taking on losses of up to ₹50 per litre on diesel and ₹20 per litre on petrol.
Now, with the excise duty cut on petrol and diesel prices, the government has stepped in to shoulder the loss burden of its oil companies.
Excise Duty Changes for Petrol and Diesel
According to government gazette, the revised rates for special additional excise duty and additional excise duty are as follows:
- Motor Spirit (Petrol): The Special Additional Excise Duty is reduced to “Nil” (from any previous rate). The Additional Duty of Excise is also set to “Nil”.
- Total effective cut: While the document does not explicitly state the previous total rate, it completely removes these two specific duty components for petrol.
- High-Speed Diesel: The Special Additional Excise Duty is set at ₹18.5 per litre. The Additional Duty of Excise is set at ₹3 per litre.
- Aviation Turbine Fuel (ATF): Initially, the document notes an amendment to the Finance Act to levy SAED at ₹50 per litre. However, a subsequent exemption notification (No. 08/2026) reduces this effective rate to ₹29.5 per litre. Furthermore, Notification No. 09/2026 provides a total exemption from the “whole of the Special Additional Excise Duty” for ATF.
Key Conditions and Exemptions
- Export Restrictions: Most of these reduced rates and exemptions do not apply to goods cleared for export.
- Public Sector Exception: An exception is made for exports by Indian Oil to Nepal, Bhutan, Bangladesh and Sri Lanka. These exports remain eligible for the rules/exemptions mentioned in the notifications.
- Foreign Aircraft: Exemption from basic excise duty, agriculture infrastructure and development cess is granted for petrol, diesel, and ATF when supplied as fuel to foreign-going aircraft.
To be sure, there have been instances of petrol and diesel price hikes in the recent past, albeit in smaller pockets. On Thursday, Nayara Energy Ltd.—India’s largest private fuel retailer—broke the status quo by hiking petrol prices by ₹5 per litre and diesel by ₹3 per litre. The move triggered panic buying and long queues at fuel stations across India as people feared that Indian Oil would soon follow suit.
