The Indian government has increased the excise duty on petrol and diesel by ₹2 per litre, effective April 8, 2025. Despite the hike, consumers won’t feel the pinch as recent retail fuel price cuts offset the change. The move comes amid declining global crude oil prices, which have hit their lowest since April 2021. Shares of major oil marketing companies fell following the announcement. While the decision is aimed at boosting government revenue, it drew criticism from the opposition, accusing the Centre of not passing on the benefit of cheaper crude to the public.
In India, petrol and diesel prices are not fixed by the government anymore. They are decided daily by oil companies. Here’s a simplified breakdown of how the rates are set:
🚗 How Petrol & Diesel Prices Are Decided:
- Crude Oil Price (Global) 🛢️
- India imports crude oil. Its global market price is the base.
- If crude oil price goes up, petrol/diesel becomes costlier.
- Refining Cost 🏭
- Crude oil is processed in refineries to make petrol/diesel.
- This cost is added to the price.
- Transportation & Dealer Commission 🚚💰
- Moving fuel from refinery to petrol pump has a cost.
- Petrol pump dealers also get a fixed commission.
- Taxes (Big Chunk!) 🧾💸
- Central Govt. Tax (Excise Duty)
- State Govt. Tax (VAT) – varies by state
- These two together make up a large portion of the final price.
- Since 2017, fuel prices have been deregulated, meaning OMCs adjust prices daily based on global crude prices, but tax rates are set by governments and can remain static even if crude prices drop.
- Final Retail Price ⛽
- Sum of all the above is what you pay at the pump.
⏱️ Daily Price Change:
- Prices are updated daily at 6 AM based on international crude oil price and forex rates (₹ vs $).
Example (Rough Idea):
If petrol is ₹100:
- Crude cost: ₹40
- Refining & transport: ₹10
- Taxes: ₹45 (Central + State)
- Dealer margin: ₹5
