Petrol Diesel: Big news for everyone. Following a significant reduction in the Special Additional Excise Duty (SAD) on petrol and diesel, the central government has devised a significant strategy to address the rising prices of petrol and diesel in the country. The government has now decided to review fuel prices and international market conditions every 15 days. The government’s goal is to ensure that any changes in global crude oil prices directly benefit the common man. Following the reduction of Rs 10 per liter on both fuels, the total central excise duty on petrol is now Rs 11.9 per liter and on diesel Rs 7.8 per liter.
What is the government’s new plan?
This change is effective immediately. After reducing excise duty on petrol and diesel, the government is now adopting a “wait and watch” approach. The government clarified that this reduction will not impact retail petrol and diesel prices. Central Board of Indirect Taxes and Customs Chairman Vivek Chaturvedi said in a press briefing that this step was taken to address the under-recovery of oil marketing companies caused by the surge in global crude oil prices and supply disruptions. This will give the government control over price fluctuations and allow for further adjustment of rates if necessary.
Why was this decision taken?
The ongoing conflict between the US, Israel, and Iran has impacted the energy infrastructure in the Middle East. Iran imposed a blockade on the Strait of Hormuz, causing global benchmark Brent crude prices to rise from $68 per barrel on February 28 to over $100 on March 7. By Friday afternoon, the price was around $110 per barrel. The Strait of Hormuz transports 20-25% of the world’s seaborne crude oil and gas. India imports 40-50% of its crude oil through this route. A large portion of LNG and LPG from Qatar and the UAE also comes through this route, which is vital for over 330 million households.
No immediate oil or gas shortages
The government has assured that there is no immediate oil or gas shortage. Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas, said, “We are still in a war-like situation. Crude oil, LPG, and LNG supplies have been affected, but we have sufficient inventory and supplies have been lined up for the next two months. The LPG and LNG situation is comfortable. Refineries are operating at more than 100% capacity, and commercial supplies have been restored to 70% in the last few weeks.”
Vivek Chaturvedi explained that prices of crude oil, petrol, diesel, and aviation turbine fuel (ATF) are experiencing sharp fluctuations. The government has adopted a calibrated approach. Special additional excise duty and cess have been imposed to control the export of diesel and ATF. Petrol and diesel rates will be reviewed every 15 days. This will facilitate quick decision-making based on market conditions. Retail prices will remain unchanged for the time being.
