The central government has increased excise duty on petrol and diesel by ₹2 per litre starting April 8, 2025. Petrol will now have a tax of ₹13 per litre (up from ₹11), while diesel will be taxed at ₹10 per litre (up from ₹8).
Will Petrol and Diesel Prices Go Up?
No, fuel prices at petrol pumps are not expected to rise immediately. Oil companies (like Indian Oil, BPCL, and HPCL) will absorb this tax hike for now. In fact, if global crude oil prices fall below $65 per barrel, fuel prices may even decrease.
Where Does This Extra Tax Money Go?
The additional tax collected goes to the central government. This money is used for public spending, like building roads, hospitals, and funding subsidies.
Why Did the Government Increase Taxes Now?
Global oil prices have been falling recently. Also, the government had removed its special tax on oil company profits in December 2024. This excise hike helps recover some lost revenue, especially since oil companies are losing money on LPG (cooking gas) subsidies.
How Does This Affect Oil Companies?
Oil companies are currently losing about ₹42,000 crore this year on LPG subsidies. The ₹2 fuel tax hike, along with a ₹50 increase in LPG cylinder prices, will help reduce their losses slightly.
What About Petrol Pump Owners?
Petrol pump dealers earn a fixed commission (around ₹3.50-₹4 per litre for petrol and ₹2.50-₹3 for diesel). This tax change doesn’t affect their earnings directly, since oil companies are covering the extra tax themselves.
The government is balancing two things:
– Not raising fuel prices for consumers
– Making sure it has enough money for important expenses
Since global oil prices are lower right now, this tax increase helps the government without hurting people’s wallets immediately. However, if oil prices rise sharply in the future, fuel costs could go up.