Petrol, Diesel Excise Cuts to Cost Centre Over ₹1 Lakh Crore in FY27: Report

The Centre may face a significant revenue shortfall in FY27 following recent excise duty cuts on petrol and diesel, according to a report by Moneycontrol. While the move aims to ease fuel prices amid rising global energy costs, it could result in a revenue loss exceeding ₹1 lakh crore for the full year.

The decision comes against the backdrop of the ongoing West Asia crisis, which has disrupted global fuel supply chains and pushed up international prices.

Excise Cuts Could Trigger Massive Revenue Impact

India consumes around 450–600 million litres of fuel daily. Based on the current consumption trends, diesel accounts for 300–350 million litres, while petrol contributes 150–250 million litres. A ₹10 per litre cut translates into a daily revenue loss of ₹450–₹500 crore, which, when annualised, amounts to approximately ₹1.6 lakh crore to ₹1.8 lakh crore.

Export Duties Aim to Offset Revenue Loss

As per the report, the excise duty on petrol has been reduced from ₹13 per litre to ₹3 per litre, while diesel duty has been cut from ₹10 per litre to nil. To partially compensate for the revenue hit, the government has imposed export duties:

• ₹21.5 per litre on diesel exports
• ₹29.5 per litre on jet fuel exports 

These measures are aimed at ensuring adequate domestic supply during the current supply disruptions while also generating additional revenue through windfall taxes on exports.

Balancing Consumer Relief and Fiscal Trade-Off

The excise duty cuts are expected to ease pressure on retail fuel prices and support demand, especially at a time of heightened global volatility. However, they also highlight the scale of fiscal trade-offs involved in such interventions.

While export duties may help offset some of the losses, the net impact on government finances remains substantial, particularly if global prices remain elevated and duty cuts are maintained through the year.

Read more: LPG Refill Booking Rules Unchanged: Government Dismisses Viral Claims on Timeline Changes.

Conclusion

The Centre’s decision to cut excise duty on petrol and diesel underscores its focus on consumer relief and energy stability during a period of global uncertainty. However, the move comes at a considerable fiscal cost, with potential revenue losses exceeding ₹1 lakh crore in FY27.

Going forward, the sustainability of such measures will depend on global oil price trends, domestic consumption patterns, and the government’s ability to balance revenue needs with economic stability.

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