In a calibrated fiscal move aimed at bolstering government revenues without disrupting consumer sentiment, the Centre has announced an increase in excise duty on petrol and diesel by ₹2 per litre, effective April 8.
The decision, formalised through a notification from the Department of Revenue under the Ministry of Finance, raises the total excise duty on petrol to ₹13 per litre and on diesel to ₹10 per litre. However, the Ministry of Petroleum and Natural Gas has assured that this adjustment will not be passed on to consumers, as retail pump prices will remain unchanged for now. This strategic balancing act between fiscal needs and public impact comes at a time when the global oil market continues to exhibit volatility. While a hike in central excise typically prompts a proportional rise in fuel prices at the consumer end, the government’s assurance of price stability appears to be an attempt to avoid economic ripple effects, particularly in the run-up to the general elections and amidst growing inflation concerns. The oil marketing companies, which often bear the brunt of such excise adjustments, are likely to manage the cost internally at least in the short term, supported by the current cushion of relatively stable global crude prices.
This isn’t the first time the Centre has fine-tuned fuel taxation for revenue generation without altering the price at the pump. In December 2024, the government withdrew the windfall tax imposed on domestic crude oil and exports—initially introduced in July 2022—citing easing international oil prices. The latest revision in excise duty now appears to be a part of a broader revenue mobilisation strategy that allows the government to augment its non-tax receipts while maintaining macroeconomic stability and public trust.
While the increase in duty may not pinch household budgets immediately, the impact on downstream operations, logistics, and input costs across sectors will need monitoring, especially if oil companies begin to adjust margins or if global crude trends turn unfavourable. Additionally, with retail fuel prices remaining static, the move provides room for public sector oil firms to offset under-recoveries or future cost spikes, offering them a breather in managing profit margins in a tightly regulated pricing ecosystem.
As the country continues its transition towards cleaner fuels and aims for a net-zero carbon future, tweaks in fossil fuel taxation remain an important lever for the state, both for revenue and to nudge behavioural shifts in consumption. However, such policy decisions must strike a delicate balance between fiscal prudence and sustainable energy goals, especially when alternative mobility solutions and renewable energy infrastructure are still evolving. For now, the government seems to have walked this tightrope by insulating citizens from immediate price shocks while replenishing its coffers.
Government increases fuel excise duty by two rupees per litre nationwide
