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Government hikes fuel excise duty by Rs 2/litre; cooking gas to cost Rs 50 more amid market turmoil

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07th April, 2025 18:27 IST

In a move drawing sharp criticism from opposition leaders and citizen groups, the Centre on Monday, 7 April announced raising excise duty on petrol and diesel by Rs 2 per litre, according to a notification issued by the Revenue Department. Simultaneously, the price of domestic (LPG) has been hiked by Rs 50 per cylinder, burdening households already reeling under economic strain and a tumbling stock market. This will be applicable for both Ujwala and non-Ujwala beneficiaries.

The revised excise duties — Rs 13 per litre for petrol and Rs 10 per litre for diesel — will take effect from 8 April 2025. However, the criticism forced the government to clarify that retail will remain unchanged, as state-owned oil marketing companies (OMCs) will be asked to absorb the hike.

This adjustment comes despite a sharp fall in prices, which have slid to around $60 per barrel — a near 41 per cent drop since May 2014.

Petroleum Minister addressing a press conference in New Delhi, said, “Let me clarify upfront and on the record — this will not be passed on to the consumer.” He noted that oil companies are still managing inventory priced at an average of $75 per barrel and are not in a position to reduce pump prices immediately.

However, he suggested there may be scope for future retail price adjustments if crude prices stabilise at lower levels.

The latest policy development comes against the backdrop of the last significant fuel price cut in March 2024, when OMCs reduced retail prices by Rs 2 per litre for both petrol and diesel.

While this offered brief respite to consumers, industry analysts warn that the continued strategy of OMCs absorbing fiscal shocks — whether from global crude volatility or tax hikes — may not be sustainable.

“The risk of OMCs not passing on future price hikes is substantial,” said industry experts. “Although this provides short-term price stability, it also sets the stage for sharper increases later if these companies continue to accumulate losses.”

The ability of OMCs to withstand this pressure largely depends on international crude prices and refining margins. Any renewed surge in global prices or contraction in margins could force sudden and steep retail price hikes to recover losses.

The hike in LPG prices affects both subsidised Ujjwala scheme beneficiaries and general category customers. A 14.2 kg LPG cylinder will now cost Rs 550 for Ujjwala users and Rs 853 for non-subsidised consumers. The increase comes just days after a reduction of Rs 41 in commercial LPG rates — a move aimed at benefiting the hospitality and service sectors.

Critics have called the timing of the excise duty hike “insensitive” and “regressive,” particularly as small investors watched Rs 19.4 lakh crore wiped off the market capitalisation of BSE-listed companies during Monday’s sell-off.

Congress president lashed out at the government, stating, “There was a shortage of LPG gas cylinders, Modi ji… Now the whip of inflation has fallen on the savings of poor women under the Ujjwala scheme. Looting, extortion, fraud — all have become synonymous with the Modi government.”

Congress MP questioned the government’s fuel pricing policy, asking why the fall in global crude prices was not being reflected at the consumer level. “What happened to dynamic pricing? Is it a one-way street that only goes up and never comes down?” he said.

Despite government assurances, many observers view the decision as a missed opportunity to offer relief to the middle class and economically vulnerable segments of society. With inflation biting and markets in free fall, the hikes have come under increased scrutiny.

As opposition grows and crude prices show no sign of rebound, all eyes are now on the next move of the OMCs and the government. Whether consumers will eventually see any real benefit from the current dip in global crude—or whether they will be left footing a much larger bill down the line—remains to be seen.

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