The government has slashed excise duties on petrol and diesel by ₹10 per litre each, bringing them down to ₹3 per litre for petrol and zero for diesel. The announcement would ordinarily be cause for celebration at every petrol pump in the country. It is not. Sources have confirmed that the excise duty cut is unlikely to translate into any savings for consumers because the entire reduction will be absorbed by oil marketing companies to offset the catastrophic per-litre losses they are currently incurring due to the global energy crisis.
The gap between the cost of producing and selling fuel in India right now and the price at which it is being sold to consumers is so large that a ₹10 per litre excise cut does not come close to bridging it.
The OMC Loss That Swallows the Entire Cut
Oil marketing companies including Indian Oil, Bharat Petroleum, and Hindustan Petroleum are currently losing ₹48.8 per litre on every litre of petrol and diesel sold in India. That number is the direct consequence of Brent crude oil crossing $100 per barrel following the US-Israel war on Iran and the consequent Tehran-imposed blockade on the Strait of Hormuz, while retail fuel prices in India have been held flat by the government to protect consumers from the full inflationary impact of the global energy crisis.
The arithmetic is straightforward and painful. OMCs lose ₹48.8 per litre at current crude prices and the retail price freeze. The government cuts excise by ₹10 per litre. The OMCs retain that ₹10 saving to reduce their losses from ₹48.8 to ₹38.8 per litre. The consumer pays the same price at the pump. The relief is real for the OMC balance sheet. It is invisible at the petrol station.
Nayara Energy Has Already Hiked Prices
A day before the government’s excise cut announcement, Nayara Energy, India’s largest private fuel retailer with an 8.4 percent market share, hiked petrol prices by ₹5.3 per litre and diesel by ₹3 per litre. Backed by Russian company Rosneft and Kesani Enterprises, Nayara does not have the same obligation as state-owned OMCs to hold prices flat as a matter of government policy. Its price hike, the first from a major fuel retailer since the crisis began, is a signal of what state-owned OMC prices would look like if the government did not intervene to hold them down.
Nayara’s hike also means that consumers who fill up at Nayara stations are already paying significantly more than those at Indian Oil, Bharat Petroleum, or Hindustan Petroleum pumps. The private-public price divergence is an unusual and uncomfortable situation that reflects the extraordinary nature of the current energy cost environment.
Why the Excise Cut Was Made Now
The excise duty reduction comes amid rising fears of fuel price hikes driven by the global energy crisis. With Brent crude above $100 per barrel, Nayara having already moved on retail prices, and OMC losses at historic levels, the pressure on the government to do something visible was significant. The excise cut is that visible action. It demonstrates policy responsiveness to the crisis and provides OMCs with meaningful additional revenue to reduce their loss per litre, even if it delivers no immediate consumer price relief.
The government is effectively channelling the excise reduction as a subsidy mechanism to the OMCs rather than to consumers, buying time for the energy crisis to resolve itself diplomatically before the OMC loss position becomes financially unsustainable and forces a retail price hike that would feed directly into consumer price inflation.
India’s Fuel and Energy Supply Position
The excise cut announcement comes alongside the government’s most comprehensive public briefing yet on India’s energy supply position amid the Hormuz crisis. The picture that emerges from official statements is one of managed stress rather than immediate crisis.
Junior Petroleum Minister Suresh Gopi told Parliament this week that India’s three strategic petroleum reserves currently hold approximately 3.372 million tons, or two thirds of their maximum capacity. Total reserves including strategic petroleum reserves and ready-to-use fuel held by oil marketing companies stand at 74 days of coverage. This 74 day buffer is the most specific government figure yet on India’s actual supply runway under the current disruption scenario.
On LPG, the cooking gas used by over 33 crore Indian households, the government said early March it had ordered a 25 percent increase in domestic production. It has also confirmed approximately 30 days of LPG cylinder supply in current reserves. Separately, the government has stressed that India has 60 days of overall oil stock cover.
Industry sources told NDTV that the government has fast-tracked the signing of contracts to diversify crude and LPG imports, accelerating the supply chain adjustments that India’s energy procurement strategy has been gradually building since the Russia-Ukraine conflict began. The government has also categorised recent reports of fuel shortages as a deliberate misinformation campaign designed to trigger panic buying, urging citizens not to make unnecessary fuel or cylinder purchases based on social media claims.
The Hormuz Context That Drives Everything
The entire fuel price and excise duty story is a downstream consequence of the Strait of Hormuz blockade that Iran imposed following the US-Israel strikes on Iranian territory. The Hormuz is one of the world’s most critical energy supply channels. Pre-war, approximately a fifth of global seaborne crude oil and gas, between 20 and 25 million barrels of crude and about 10 billion cubic feet of gas per day, was shipped through the narrow maritime passage.
For India specifically, an estimated 40 to 50 percent of crude oil imports, between 2.2 and 2.8 million barrels per day, historically flowed through Hormuz. India also sources approximately 16 to 17 percent of its LNG imports from Qatar and the UAE through the same passage. And large quantities of LPG, used by 33 crore households for cooking, come from Qatar and Iran via Hormuz.
The government has reduced this dependency significantly in recent years, with India’s Hormuz share of crude imports falling from 61 percent in 2020 to approximately 33 percent by 2025 through aggressive diversification including Russian crude via the Danish Straits and supplies from multiple alternative sources. That diversification is the primary reason India’s supply situation is stressed but manageable rather than crisis-level despite the blockade.
What Consumers Should Actually Expect
For the ordinary Indian filling up their vehicle or booking an LPG cylinder, the immediate practical answer to what changes today is: nothing visible. Petrol and diesel prices at state-owned pumps remain unchanged. LPG cylinder prices remain unchanged. The excise cut has happened at the government level and will benefit OMC balance sheets, not pump prices.
The scenario in which consumers eventually see price relief is one where the Iran conflict resolves, Hormuz reopens, Brent crude falls back toward $70 to $80 per barrel, OMC losses reduce to manageable levels, and the government allows OMCs to pass on the reduced cost to consumers through lower retail prices. Iran’s rejection of the US proposal on March 26 and the renewed diplomatic standoff make that scenario more distant today than it appeared to be 48 hours ago.
Until the energy crisis resolves, the government is managing a situation where every litre of fuel sold at a petrol pump in India costs the state-owned oil companies nearly ₹49 more than what the consumer pays. The ₹10 excise cut helps. It does not solve the problem.
This article is based on official government statements, NDTV Profit reporting, and publicly available energy market data as of March 26, 2026. All figures cited are from official parliamentary statements and government sources.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.