Central Govt raises Excise Duty on petrol and diesel by Rs 2 each

The Central Government raised the Excise Duty of both petrol and diesel by Rs 2 each, a notification issued on Monday by the Ministry of Finance in this regard mentioned. However, this notification shall come into force on April 8, 2025, the Ministry clarified.

Also Read: Excise duty on petrol, diesel slashed in Odisha; check rates

Meanwhile, the PSU Oil Marketing Companies have asserted that there will be no increase in retail prices of Petrol and Diesel, subsequent to the increase effected in Excise Duty rates today. This was informed through a post on the official ‘X’ handle by the Ministry of Petroleum and Natural Gas.

Comparative tax burden

In New Delhi, combined central and state taxes total Rs 49.42/litre for petrol and Rs 48.09/litre for diesel, compared to base fuel prices of Rs 17.96 and Rs 18.49, respectively. This tax structure makes Indian fuel prices significantly higher than global benchmarks.

Fiscal rationale behind hike

Fuel taxes contribute 12.2% of central tax revenue as of 2025, up from 5.4% in 2014. The current hike follows a pattern of using fuel taxation to fund infrastructure while managing fiscal deficits.

Historical tax trajectory

Central fuel taxes have increased 300% since 2014, with excise duty on petrol rising from Rs 9.48 to Rs 32.90/litre and diesel from Rs 3.56 to Rs 31.80/litre by 2021. Taxes now constitute 60% of petrol and 53% of diesel prices nationally.

Immediate price impact

Despite the tax increase, retail fuel prices remain unchanged as oil marketing companies offset the duty hike against recent international oil price declines. This maintains petrol at Rs 71.26/litre and diesel at Rs 69.39/litre in New Delhi.

Must Read: Petrol, diesel prices on Aug 8: Check fuel rates at different places in Odisha

Recent Excise Duty adjustment

The Indian government increased central excise duties on petrol and diesel by Rs 2 per litre on April 7, 2025, raising petrol duty to Rs 13/litre and diesel to Rs 10/litre. This marks the first fuel tax hike since 2020 and takes effect from April 8, 2025.