Daijiworld Media Network - New Delhi
New Delhi, Apr 7: In a strategic fiscal maneuver, the government today announced an increase in excise duty on both petrol and diesel by ?2 per litre, effective from Tuesday. However, consumers will not experience an immediate hike in the retail prices of these fuels, as a corresponding decrease in global oil prices will offset the increased duty.
This scenario allows oil refining and marketing Public Sector Undertakings (PSUs) such as Indian Oil and Bharat Petroleum to benefit from lower crude oil procurement costs, thereby expanding their retail profit margins. This favourable condition enables the government to augment its revenue through the excise duty hike without imposing an additional financial burden on end consumers.
"The PSU Oil Marketing Companies have informed that there will be no increase in retail prices of petrol and diesel, subsequent to the increase effected in Excise Duty Rates today," confirmed the Ministry of Petroleum and Natural Gas in a post on X.
Following the government order, the excise duty on petrol will now stand at Rs 13 per litre, and on diesel at Rs 10 per litre.
This move to bolster government revenue aligns with the significant drop in global crude oil prices, which have reached a four-year low. Benchmark Brent crude has fallen to $63 a barrel, its lowest level since April 2021, while US West Texas Intermediate crude has declined to $59.57. As the world's third-largest importer of crude oil, India stands to gain substantially from this price downturn.
Global oil prices continued their downward trajectory on Monday, nearing a 4% decline. This drop is attributed to escalating trade tensions between the United States and China, fueling concerns of a potential recession that could dampen crude oil demand. Additionally, the OPEC+ oil cartel's decision to increase supply has further contributed to the price decrease.
Brent futures experienced a loss of $2.43, or 3.7%, settling at $63.15 a barrel, while US West Texas Intermediate crude futures were down 3.9% at $59.57.
Adding to the downward pressure, Saudi Arabia, the world's leading oil exporter, announced on Sunday a reduction in crude oil prices for Asian buyers in May by up to $2.3 per barrel.
The decline in oil prices presents a positive outlook for the Indian economy, given that the country imports approximately 85% of its crude oil requirements. Lower oil prices translate to a reduced import bill, which in turn helps to narrow the current account deficit (CAD) and strengthen the rupee.
Beyond improving the external balance, falling oil prices typically lead to lower domestic prices for petrol, diesel, and LPG, thereby easing inflationary pressures within the country.
The government has also actively worked to mitigate India's oil import expenditure by facilitating the purchase of discounted Russian crude oil by domestic oil companies, despite pressure from Western nations following the Ukraine conflict. The current administration has maintained its robust ties with Russia despite sanctions imposed by the USA and Europe.
Consequently, Russia has emerged as India's largest crude oil supplier, surpassing traditional leaders Iraq and Saudi Arabia. India has become the primary purchaser of Russia's seaborne oil, which now accounts for nearly 38% of India's total oil imports.