₹10 petrol, diesel excise cut: Will fuel get cheaper?
What's the story
The government has slashed the excise duty on petrol and diesel by ₹10. The new rates are ₹3 per liter for petrol, down from ₹13, and zero for diesel, down from ₹10. However, this may not lead to an immediate drop in retail fuel prices as they are determined by oil marketing companies such as Indian Oil Corporation and Bharat Petroleum Corporation.
Price dynamics
Oil companies may not pass on benefit immediately
According to experts cited by India Today, oil companies may not pass on the benefit of the duty cut to consumers immediately. This is because these companies have been bearing high crude oil prices due to geopolitical tensions in West Asia. The timing of this duty cut is also crucial, as it comes after Nayara Energy's recent hike in petrol and diesel prices.
Revenue impact
Global fuel prices have increased significantly
Oil Minister Hardeep Singh Puri explained that international crude prices have skyrocketed in the last month, from around $70 per barrel to nearly $122 per barrel. This global spike has led to a steep rise in fuel prices worldwide. The government had to choose between passing on the full burden of these costs to consumers or absorbing part of it, which would impact government revenues.
Consumer protection
Aimed at protecting consumers from global price shocks
Puri said the excise duty cut was aimed at protecting Indian consumers from global price shocks. He also pointed out that oil marketing companies were suffering huge losses due to high global prices. The duty cut would ease some of this burden on them, Puri added. However, as long as crude prices remain high, there is little scope for oil companies to meaningfully reduce retail prices.
Price stability
Excise duty cut acts as a cushion for consumers
The excise duty cut is expected to act more as a cushion rather than a direct price reduction. It will give oil companies some leeway to manage costs without immediately raising prices. For consumers, this means that while petrol and diesel prices may not see a sharp decline due to the duty cut, it will likely prevent further increases in the near term amid global uncertainty.