India has lifted key excise duties on petrol and diesel prices in India to protect refiners led by Indian Oil Corporation Ltd from crude oil shocks arising from the ongoing Iran war in West Asia. There is no change in prices at the pump.
In a series of late night notifications, the Finance Ministry announced that special additional excise duty and additional excise duty on petrol have been reduced to “zero”. Government has set special additional excise duty for diesel ₹Rs 18.5/litre plus additional excise duty ₹3/Litre.
These measures took effect immediately as Brent crude remains volatile near $100 a barrel, having recently touched a high of $119 following military attacks on Iranian infrastructure. India, which imports ~88% of its crude oil, is considered the most vulnerable to the crisis in West Asia.
With the effective closure of the Strait of Hormuz – a chokepoint for a fifth of global oil consumption – daily transit has dropped from 120 vessels to just a handful, putting about 20 million barrels per day at risk.
However, India’s oil marketing companies—Indian Oil, Bharat Petroleum and Hindustan Petroleum—have borne the pain by keeping petrol and diesel prices in check to keep inflation under control. The loss is estimated to be up to ₹Rs 50 more per liter on diesel ₹Rs 20 per liter on petrol.
Now, with the cut in excise duty on petrol and diesel prices, the government has stepped in to shoulder the loss burden of its oil companies.
Change in excise duty for petrol and diesel
The revised rates of Special Additional Excise Duty and Additional Excise Duty as per the Government Gazette are as follows:
- Motor Spirit (Petrol): Special additional excise duty has been reduced to “nil” (from any previous rate). The additional charge of excise duty is also set to “zero”.
- Total effective reduction: Although the document does not explicitly state the previous total rate, it completely removes these two specific duty components for petrol.
- High-Speed Diesel: Special additional excise duty is prescribed ₹18.5 per litre. Additional duty of excise is prescribed ₹3 per litre.
- Aviation Turbine Fuel (ATF): Initially, the document mentions amendments to the Finance Act to impose SAED ₹50 per litre. However, a subsequent relaxation notification (No. 08/2026) reduces this effective rate to ₹29.5 per litre. Further, Notification No. 09/2026 provides complete exemption from “Entire Special Additional Excise Duty” for ATF.
Key Terms and Discounts
- Export Restrictions: Most of these lower rates and exemptions do not apply to goods approved for export.
- Public Sector Exception: An exception has been made by Indian Oil for exports to Nepal, Bhutan, Bangladesh and Sri Lanka. These will remain eligible for the rules/relaxations mentioned in the export notifications.
- Foreign aircraft: Exemption from basic excise duty, agriculture infrastructure and development cess for petrol, diesel and ATF when supplied as fuel to foreign-bound aircraft.
Certainly, there have been incidents of petrol and diesel price hikes in recent times, albeit in small areas. On Thursday, Nayara Energy Ltd, India’s largest private fuel retailer, broke the status quo by increasing petrol prices. ₹5 per liter and by diesel ₹3 per litre. The move triggered panic buying and long queues at fuel stations across India as people feared Indian Oil would soon do the same.