India slashes fuel excise as oil tops $100, imposes windfall levies

New Delhi– India has cut excise duties on petrol and diesel while imposing windfall taxes on aviation fuel and diesel exports, as the government moves to cushion consumers and contain inflation amid a surge in global oil prices triggered by the Iran conflict.

International crude prices have climbed above $100 per barrel following disruptions around the Strait of Hormuz, a critical route that accounts for about 40% of India’s crude imports, after military strikes by the United States and Israel on Iran late last month.

Oil Minister Hardeep Singh Puri said the government had absorbed a significant fiscal burden to offset losses incurred by oil marketing companies, estimating under-recoveries of about 24 rupees per litre on petrol and 30 rupees per litre on diesel at current global prices.

Economist Madhavi Arora of Emkay Global estimated the annualised fiscal impact of the duty cuts at around 1.55 trillion rupees, noting that the measures would cover roughly 30% to 40% of annual losses faced by fuel retailers.India’s benchmark 10-year government bond yield rose 7 basis points to 6.95%, its highest level in 20 months, reflecting concerns over increased borrowing and fiscal strain

.Shares of state-run refiners, including Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited, rose more than 4% at the open before trimming gains later in the session.

Although India formally deregulated fuel pricing, state-owned oil marketing companies which dominate about 90% of the retail market often delay passing on higher crude costs to consumers during periods of volatility.

The latest measures highlight the government’s reliance on tax adjustments and export levies to manage domestic fuel prices and inflationary pressures during global energy shocks.