Petrol, diesel excise cut: How India held prices in 2026

Crude shock, but retail prices stayed steady

Global crude prices surged to record highs as the West Asia conflict tightened supply and logistics, but retail petrol and diesel prices in India remained stable through April. The Indian crude oil basket nearly doubled, rising from around $13 a barrel in January to an average $116 a barrel in April. Over roughly the past month, international crude was also cited as climbing from around $10 a barrel to about $122 a barrel. In many other markets, the price shock showed up quickly at the pump, with fuel prices rising across regions cited by the government. In India, the Centre chose a mix of tax steps, supply-side actions, and stock buffers to avoid an immediate pass-through to consumers.

What changed in domestic prices: LPG, industrial diesel, premium petrol

While petrol and diesel retail rates were held steady, consumers were not insulated from every petroleum product increase. Prices of both domestic and commercial LPG cylinders were hiked, according to the report. State-owned oil marketing companies also increased prices of industrial diesel and premium fuel variants. These moves indicate that the government’s protection strategy focused on the most inflation-sensitive retail fuels, while allowing increases in other categories.

The excise duty cut and what it was meant to do

A central measure was a cut in excise duty on petrol and diesel by ₹10 per litre each. This brought the Centre’s excise levy on petrol down to ₹3 per litre and reduced it to zero on diesel. The report notes that the move was aimed at protecting oil companies rather than delivering an immediate reduction in consumer retail prices. Petroleum and Natural Gas Minister Hardeep Singh Puri also said the government chose to absorb the financial impact instead of passing on the full burden of rising costs.

Export taxes and windfall levies to keep fuel at home

Alongside excise changes, the Centre used export-linked duties to discourage exporters from taking advantage of price gaps and to support domestic availability. The windfall tax on diesel exports was raised to ₹55.5 per litre from ₹21.5 per litre, and on aviation turbine fuel (ATF) to ₹42 per litre from ₹29.5 per litre. Export duty on petrol remained nil. Separately, a government communication cited duties imposed on exports of diesel at ₹21.5 per litre and ATF at ₹29.5 per litre, underscoring the use of export taxation as a tool as global prices surged. The report also states that any refinery exporting petrol or diesel would have to pay export tax.

Diversifying imports: Russia and Venezuela

India also leaned on import diversification to ensure supplies amid West Asia constraints. The country increased crude oil and LPG imports from Russia to stabilise supply. In March, India imported a record 2.25 million barrels per day from Russia, nearly doubling February’s volumes, and Russian oil made up 50% of India’s total imports. Oil imports from Venezuela were also said to be rising.

Waivers, insurance cover, and the cost of Russian barrels

Some of the Russia-related flows were facilitated by policy changes outside India as well. Washington issued a 30-day waiver in mid-March allowing countries to buy sanctioned Russian oil and petroleum products to help stabilise global energy markets affected by the war with Iran, and the waiver was renewed last week. Indian refineries paid premiums of $1 to $1 per barrel over dated Brent for Russian oil cargoes. On the operational side, India expanded the number of Russian insurers eligible to provide marine cover for ships docking at its ports from eight to 11, according to the Directorate General of Shipping.

Strategic reserves as a buffer

The government said India’s strategic oil reserves had three-fourth crude availability. That stock cushion forms part of the broader approach to maintaining supply continuity even as the Strait of Hormuz disruption risk stayed in focus. The West Asia crisis was described as linked to a US-Israel conflict with Iran and Tehran’s blockade of the Strait of Hormuz, a key route for global crude and gas flows.

Official stance on pump prices after elections

On April 23, the petroleum and natural gas ministry denied reports suggesting a possible hike in petrol and diesel prices after state elections. It said the government was not considering any such proposal. The communication came amid public attention on the gap between rising global crude and unchanged domestic retail fuel prices.

The stress point: OMC under-recoveries and sustainability

Holding retail prices steady shifts financial stress onto oil marketing companies (OMCs) and the government’s tax revenues. Moody’s Ratings estimated that OMCs were incurring under-recoveries of ₹1,500 to ₹2,000 crore per day (about $160-215 million per day). Moody’s said losses of this magnitude are not sustainable and that if energy prices remain high, the government is likely to introduce further measures such as compensation or retail-price increases to relieve pressure on OMCs. Industry players cited in the report said any rise in oil prices could be gradual over time rather than on a flat-rate basis.

Why the policy choice matters: inflation and coordination with states

The report describes retail fuel pricing as a double-edged sword. Any rise in petrol and diesel prices can lift inflation and squeeze household budgets, which is a key reason cited for the Centre’s decision to absorb higher costs for now. But the same approach raises questions on fiscal costs and the health of fuel retailers when crude stays above $100 for a long period. Sources also pointed to the need for the Centre and states to work in tandem if retail fuel prices are to be lowered, including ensuring states do not raise duties if the Centre cuts prices.

Key figures and measures at a glance

What to watch next

India’s strategy has so far relied on absorbing part of the shock through lower excise collections, discouraging exports via duties, and securing supplies through diversified imports and supportive shipping arrangements. The government’s public line remains that there is no proposal under consideration to raise petrol and diesel prices. But the report notes that sustained crude above $100 per barrel could test the stability of the current approach. Any further steps, as flagged by Moody’s, could include compensation to OMCs or changes to retail prices if high energy prices persist.