In a move aimed at strengthening its fiscal position, the Indian government has raised the excise duty on petrol and diesel by ₹2 per litre, effective April 8, 2025. The increase comes as international crude oil prices remain relatively stable, offering a window for the government to shore up its revenues without immediately burdening consumers.

With the latest revision, the total excise duty on petrol will stand at ₹13 per litre, while diesel will attract ₹10 per litre. The hike has been formalized through a notification issued by the Central Board of Indirect Taxes and Customs (CBIC), signaling a return to using fuel taxation as a fiscal lever after a period of restraint.

Importantly, Union Oil Minister Hardeep Singh Puri clarified that consumers will not feel the pinch of this tax hike—at least for now. State-owned oil marketing companies (OMCs) like Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum will absorb the increase, maintaining current pump prices. This strategy is aimed at avoiding public backlash ahead of several state and national elections, while still achieving fiscal consolidation.

One of the key motivations behind this duty hike is to compensate for the under-recoveries incurred by OMCs over the past year. In FY 2024–25, these companies reportedly absorbed losses exceeding ₹41,000 crore from the sale of subsidized cooking gas (LPG), which was offered below market rates as part of the government’s welfare push. By increasing excise duty now, the Centre seeks to partially offset these subsidies without increasing the fiscal deficit.

Additionally, the move underscores the government's approach of adjusting domestic taxation on fuel to suit broader macroeconomic needs. With crude oil prices currently below the psychologically significant $90-per-barrel mark, the government has found room to maneuver, betting that this hike will not lead to inflationary pressure if retail prices remain stable.

While this revision does not immediately impact consumer pockets, industry analysts warn that sustained absorption of tax hikes by oil companies could strain their margins if global oil prices rise. Any future increase in crude rates could eventually be passed on to consumers unless further subsidies or tax revisions are introduced.

This development marks a critical balancing act by the Indian government—seeking revenue generation while maintaining price stability, especially as the economy braces for global uncertainties and domestic political shifts in the months ahead.