The Government of India has taken an important step to protect consumers from the sharp rise in global crude oil prices. Under this decision, the special additional excise duty on petrol has been reduced, while it has been completely removed on diesel. This move comes amid ongoing tensions in the Middle East and the crisis in the Strait of Hormuz, due to which international crude prices have surged significantly.
Let us understand what this relief means for consumers, companies, and investors.
What’s Happening?
On 26 March 2026, through an order issued by the government, the special additional excise duty on petrol was reduced from Rs 13 per litre to Rs 3 per litre. Similarly, the duty on diesel has been reduced from Rs 10 per litre to zero. In both cases, there has been a cut of Rs 10 per litre.
Petroleum Minister Hardeep Singh Puri, while explaining the decision, said that the Modi government had two options, either pass on the heavy burden of rising prices to citizens, as several other countries have done, or absorb the burden through government finances and shield Indian consumers from global volatility. In his post on X, he noted that international crude prices have risen from around $70 per barrel to $122 per barrel over the past month.
Context of Rise in Global Crude Oil Prices
The current crisis has emerged due to escalating tensions in the Middle East and Iran tightening control over the Strait of Hormuz, disrupting the global oil supply chain. Brent crude prices crossed $100 per barrel and, at one point, reached $108. On 27 March 2026, Brent crude was trading at $107.34 per barrel, while WTI stood at $92.67. Earlier, prices had touched $101.89 per barrel.
As a result, fuel prices have increased by 30–50% in South-East Asian countries, around 30% in North America, about 20% in Europe, and up to 50% in African nations. India is also significantly affected, as 40–50% of its crude oil and 16–17% of its LNG imports pass through the Hormuz route. This made government intervention necessary.
Challenges of Oil Marketing Companies and Government Relief
Oil marketing companies (OMCs) are currently incurring losses of about Rs 24 per litre on petrol and Rs 30 per litre on diesel, with peak losses reaching up to Rs 48.8 per litre. The primary objective of the duty cut is to provide relief to these companies and ease their financial burden. With lower taxes, their losses are expected to reduce to some extent.
However, fuel prices at the pump are unlikely to decrease immediately, as a significant portion of the relief will be used to offset company losses. Nayara Energy, the country’s largest private fuel retailer with an 8.4% market share and 6,967 petrol pumps, had already increased prices due to rising cost pressures.
The government has also clarified that total oil stock availability stands at 74 days, including 3.372 million tonnes in strategic reserves (about two-thirds of maximum capacity). Additionally, there is a 60-day cover for crude oil and a 30-day stock for LPG.
What Does This Mean for Investors?
This decision offers meaningful relief to oil marketing companies. By reducing their losses, it creates room for improvement in their financial position, which could positively influence their share prices and operational stability over the long term.
By absorbing part of the burden, the government is also aiming to keep inflation in check at the consumer level, which supports overall economic stability.
Investors may consider tracking energy sector companies that are strong in import diversification and inventory management. The move also reflects the government’s focus on consumer protection, which can strengthen market confidence. While this will lead to a reduction in government revenue, it is a short-term trade-off aimed at cushioning consumers from global shocks.
What’s Next?
This step by the Government of India provides short-term relief, but challenges remain. The Strait of Hormuz continues to be the world’s most critical oil transit route, handling 40–50% of India’s crude oil and 16–17% of its LNG imports. Due to tensions involving Iran since March 2026, ship movement in the region has reportedly dropped by as much as 95%.
On the positive side, Iran has allowed countries such as India, China, and Thailand to pass through the strait under coordinated arrangements. In March 2026, Indian-flagged tankers successfully crossed the route, nine ships by 20 March and two LPG tankers on 24 March. Ships from China and Thailand have also been granted passage following diplomatic coordination. Iran has stated that the strait will remain open for ‘friendly’ nations, provided they adhere to its protocols.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
