The government on Friday slashed excise duties for petrol and diesel by Rs 10 per litre each, bringing the centre-imposed taxes down to Rs 3 per litre of petrol and making it zero for diesel.
However, industry sources say the reduction is unlikely to translate into lower prices at fuel stations for most consumers as the cut will larely be absorbed by oil marketing companies (OMCs) to offset heavy losses on pump sales.
OMCs are currently losing Rs 48.8 per litre of petrol or diesel sold, in large part due to the surge in Brent crude prices; the global benchmark crossed US$100 per barrel red line after the US-Israel war on Iran and the Strait of Hormuz blockade.
The excise duty cut also comes a day after Nayara Energy, the country’s largest private fuel retailer with an 8.4 per cent market share and backing by Russian company Rosneft and Kesani Enterprises, hiked petrol and diesel prices by Rs 5.3 and Rs 3 per litre, respectively, NDTV Profit reported.
The US-Israel war on Iran, and Tehran’s consequent Hormuz blockade, have severely disrupted oil and gas export from the wider West Asia region.
The Hormuz is a critical energy supply channel for the world; pre-war approximately a fifth of global seaborne crude oil and gas – between 20 and 25 million barrels of crude and about 10 billion cubic feet of gas per day – was shipped via the narrow maritime channel.
As such, it is a key supply route for India; an estimated 40 to 50 per cent of crude oil imports, i.e., between 2.2 and 2.8 million barrels per day, historically comes through that passage.
India also imports large amounts of gas from West Asia; an estimated 16 to 17 per cent of LNG, or liquified natural gas, exported by Qatar and the United Arab Emirates is purchased by Delhi.
In addition, India also imports – from Qatar, again, and Iran via the Hormuz – large quantities of LPG, or liquified petroleum gas, that is used by over 33 crore households.
This degree of heavy reliance led to worries about critical oil and gas shortages in the country as a result of the Iran war. However, the government has stressed there is no immediate danger.
On Thursday the government reiterated its position and said India had about 60 days of oil stock cover and 30 days of LPG cylinder supply. Reports of shortages were slammed as a “deliberate misinformation campaign” to trigger panic buying.
Also on Thursday, industry sources told NDTV the government had fast-tracked the signing of contracts to diversify crude and LPG imports.
Meanwhile, junior Petroleum Minister Suresh Gopi told Parliament this week that India’s three strategic reserves currently hold an estimated 3.372 million tons – or two-third its maximum capacity.
In addition, current total reserves – i.e., SPRs, which hold unrefined or crude oil, and ready-to-use fuel – are at 74 days, Gopi said, “… which includes stores with oil marketing companies”.
On the supply of LPG, i.e., liquified petroleum gas used to cook food by over 33 crore Indian households, the government said early March it had ordered a 25 per cent increase in domestic production and that there is no need for panic buying.