“Will Review Rates Every 15 Days”: Center Following Excise Cut on Gasoline and Diesel

After cutting special additional excise levies on both petroleum products by Rs 10 per litre, the federal government announced on Friday that rates for gasoline and diesel would be reviewed every 15 days. According to the Petroleum Ministry, the cutbacks will immediately reduce the overall central government excise taxes on gasoline to Rs 11.9 per litre and Rs 7.8 per litre for diesel. 

At a news conference later in the day, Vivek Chaturvedi, Chairman of the Central Board of Indirect Taxes and Customs, affirmed that the cut will not have an impact on retail pricing. Chaturvedi affirmed that the cut was intended to address the underrecoveries of oil marketing businesses due to supply disruptions and price shocks brought on by the US and Israel’s attack on Iran.

“There is a significant surge in crude prices. There has been a surge for petrol, diesel, and ATF (i.e., aviation turbine fuel, a factor in commercial air fares),” he explained, “The government has a calibrated approach… special additional excise duty (i.e., windfall tax) and cess have been brought (to curb) export of diesel and ATF. Rates will be reviewed every 15 days.”

Iran launched a blockade over the Strait of Hormuz, which transports 20–25% of the world’s seaborne crude oil and gas. The conflict started on February 28 with strikes on Tehran and has since spread to target vital infrastructure throughout West Asia. The worldwide benchmark Brent crude price shot up from US$68 per barrel on February 28 (before the fighting started) to above the US$100 red line on March 7 due to the war and the blockade.

Brent was priced at US$110 per barrel as of Friday afternoon (3.40 pm IST). An estimated 40 to 50 percent of India’s crude oil imports, or 2.2 to 2.8 million barrels per day, come from the Hormuz. India also imports a lot of gas from West Asia; Delhi buys between 16 and 17 percent of the LNG (liquefied natural gas) that Qatar and the UAE export via Hormuz.

Additionally, India imports enormous amounts of LPG, or liquified petroleum gas, which is used by over 33 crore households, from Iran via the Hormuz and Qatar once again. Concerns about gas and oil shortages had arisen as a result of this reliance. The administration has emphasized that there isn’t an urgent threat, though.

The government reaffirmed its stance on Thursday, stating that India had roughly 60 days’ worth of oil stock cover and 30 days’ worth of LPG cylinder supply. Shortage reports were condemned as a “deliberate misinformation campaign” intended to incite panic purchases. The government has expedited the signing of contracts to diversify imports of LPG and crude oil, industry sources told. Sujata Sharma, the Ministry of Petroleum and Natural Gas’s Joint Secretary (Marketing & Oil Refinery), emphasized that India has “sufficient crude inventories” today.

“We are still in a war situation. Our crude, LPG and LNG supplies have been affected (but) we have sufficient inventories and have lined up supplies for the next two months,” she said.

“The LPG and LNG situation is comfortable… refineries are working at more than 100% capacity and commercial supplies have been restored from over the past few weeks to 70 per cent.”