Government Forgoes ₹14,000 Crore Tax Revenue After Fuel Duty Cut Amid West Asia Crisis

The central government has absorbed a significant revenue impact after lowering excise duties on petrol and diesel earlier this year to cushion consumers from rising fuel costs linked to geopolitical tensions in West Asia, as per PTI news reports.  

According to the Petroleum Ministry, the decision has resulted in a tax revenue loss of nearly ₹14,000 crore, even as fuel retailers continue to operate under financial pressure. 

Officials also said the government is closely monitoring fuel availability across the country to ensure uninterrupted supplies despite disruptions affecting global energy markets. 

Excise Duty Reduction Comes at Fiscal Cost 

Speaking on the impact of the duty reduction, Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, said the Centre reduced excise duty by ₹10 per litre on both petrol and diesel on March 27 following a surge in international crude oil prices. 

The increase in crude prices was largely attributed to developments in West Asia, a region that remains critical for India's energy requirements.  

Sharma noted that around 40% of India's crude oil imports, 90% of LPG imports and nearly 65% of natural gas imports are linked to the region. 

Despite these challenges, she said authorities have taken measures to ensure continuous availability of petroleum products across the country. 

Oil Marketing Companies Continue to Face Pressure 

According to Sharma, the excise duty reduction has imposed a substantial burden on government finances while oil marketing companies continue to experience losses. 

She stated that OMCs are currently losing nearly ₹600 crore per day despite recent revisions in fuel prices. The ongoing financial pressure reflects the gap between international energy costs and domestic pricing considerations. 

At the same time, domestic LPG production has reached approximately 50,000 tonnes per day as part of efforts to strengthen supply availability and reduce disruptions. 

PNG Network Expansion Continues 

Providing an update on city gas distribution, Sharma said 7.99 lakh piped natural gas (PNG) connections have already been activated.  

Infrastructure development has also been completed for an additional 2.87 lakh connections that are yet to be gasified. 

The expansion forms part of broader efforts to increase access to cleaner energy sources and strengthen the country's gas distribution network. 

Read More: Indians Overseas Travel Spending Falls to $1.09 Billion in March 2026: RBI! 

Conclusion 

The Centre's decision to reduce fuel excise duties has provided relief to consumers but has resulted in a revenue sacrifice of nearly ₹14,000 crore. While oil marketing companies continue to face losses amid elevated energy costs, the government maintains that fuel supplies remain stable and is closely monitoring inventories and distribution across the country. 

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