New Delhi, March 27, 2026 — The Finance Ministry cut excise duty on petrol by Rs 10 per litre to Rs 3 and on diesel to zero from Rs 10, effective March 26, as retail pump prices remain frozen despite Brent crude surging past $101 per barrel. Petroleum Minister Hardeep Singh Puri confirmed the move, saying oil marketing companies face losses of about Rs 24 per litre on petrol and Rs 30 per litre on diesel. The government estimates its annualised revenue sacrifice at Rs 1.55 lakh crore.
What Happened
Indian Oil, BPCL, and HPCL have absorbed rising losses since February 28, when US-Israel strikes on Iran sent crude oil prices jumping from around $70 to above $100 per barrel, a surge of more than 40 percent in under a month. Retail prices at the pump stayed unchanged throughout, exposing the three state-run oil majors to deepening under-recoveries. The Finance Ministry notification dated March 26 sets petrol excise duty at Rs 3 per litre, down from Rs 13, and diesel excise duty at nil, down from Rs 10, absorbing an estimated 30 to 40 percent of current OMC losses on auto fuels.
Aviation turbine fuel faces a higher tax burden under the same notification, a deliberate carve-out that channels relief to road transport rather than airlines. OMC shares moved sharply in pre-market trading Friday, with Indian Oil up 4.2 percent and HPCL gaining 3.8 percent before the broader market selloff on Iran war fears pushed indices lower.
Why It Matters
Indian Oil, BPCL, and HPCL together supply more than 90 percent of India’s retail fuel. Stabilising their balance sheets prevents supply disruptions and reduces the likelihood of emergency government equity infusions. Manufacturers and logistics operators, who have absorbed higher freight costs since February, benefit from pump prices staying capped. The fiscal cost is steep: Rs 1.55 lakh crore annually represents a significant compression of central government revenue at a time when the Iran conflict has already widened the trade deficit through a higher crude import bill.
What Comes Next
US President Donald Trump extended Iran’s deadline to reopen the Strait of Hormuz to April 6. If that deadline passes without resolution, Brent crude could test $110 per barrel again, reopening the gap between OMC costs and frozen retail prices. The government must also decide by March 31 whether the RoDTEP export incentive scheme receives an extension before it lapses.
Industrial Front Desk
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