Centre cuts excise on petrol to ₹3, diesel to zero
What's the story
The Indian government has slashed excise duties on petrol and diesel by ₹10 per liter each. The new rates are now ₹3 per liter for petrol and zero for diesel. The move comes amid fears of a potential spike in fuel prices due to the ongoing US-Israel war on Iran and its impact on oil supply routes.
Market response
OMCs likely to absorb cut
Despite the government's move, industry sources suggest that this reduction may not lead to lower prices at fuel stations for most consumers. This is because oil marketing companies (OMCs) are likely to absorb the cut in order to offset heavy losses on pump sales. Currently, OMCs are losing ₹48.8 per liter of petrol or diesel sold due to rising Brent crude prices amid geopolitical tensions.
Supply concerns
Hormuz blockade affects oil exports
The US-Israel war on Iran and the subsequent Hormuz blockade have severely affected oil and gas exports from West Asia. The Strait of Hormuz is a critical energy supply channel, accounting for 20-25 million barrels of crude oil and about 10 billion cubic feet of gas per day before the conflict. India relies heavily on this passage for its crude oil imports.
Energy imports
India imports over 40% of its crude oil via Hormuz
India's energy imports from West Asia include crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG). An estimated 40-50% of India's crude oil imports come through the Hormuz Strait. The country also gets 16-17% of its LNG from Qatar and the UAE, as well as large quantities of LPG from Qatar and Iran via this passage.
Reassurance
No immediate threat to fuel supply
Despite concerns over potential shortages due to the Iran war, the government has assured that there is no immediate threat. It said India has an oil stock cover for about 60 days and LPG cylinder supply for 30 days. Reports of shortages were dismissed as a "deliberate misinformation campaign" aimed at inciting panic buying among consumers.