The Indian government announced a Rs 2 per litre increase in the Special Additional Excise Duty (SAED) on both petrol and diesel today, on April 7. The revised rates, set to take effect on Tuesday, April 8, will see the SAED on petrol rise from Rs 11 to Rs 13 per litre, and on diesel from Rs 8 to Rs 10 per litre.

Despite this hike in excise duty, the Ministry of Petroleum and Natural Gas swiftly clarified that the retail prices of petrol and diesel will remain unchanged for consumers. This assurance came directly from Petroleum Minister Hardeep Singh Puri during a follow-up press conference, where he explicitly stated, "Let me clarify upfront and on the record — this will not be passed on to the consumer."

Puri addressed concerns about potential price surges at the pump, emphasizing that the government is absorbing the increased levy. He pointed to the recent softening of international crude oil prices, which have fallen to around $60 per barrel, as a key factor enabling this decision.

However, the Minister also noted that state-run Oil Marketing Companies (OMCs) are currently holding inventory procured at an average price of $75 per barrel, as they typically maintain stock for over 45 days. This suggests that while the immediate impact on consumers is negated, the OMCs will likely see some pressure on their margins in the short term.

Puri indicated a potential future scenario where consumers could benefit from lower prices. "If crude stabilises in the vicinity of $60- $65, OMCs will have the headroom to look at price," he stated, linking any future price reductions to the sustained stability of global crude oil rates.

The decision to increase the excise duty comes at a time when global crude oil prices have been on a downward trend. This slump has been attributed to a combination of increased supply from non-OPEC nations and weakening global demand, further aggravated by trade tensions stemming from tariffs imposed by the US.

Brent crude futures fell by $2.23, or 3.4%, to $63.35 a barrel, marking its lowest level since April 2021. Similarly, U.S. West Texas Intermediate crude futures decreased by $2.22, or 3.58%, to $59.77. Over the past week, both Brent and WTI recorded substantial losses of 10.9% and 10.6%, respectively.

It's noteworthy that the last reduction in fuel prices in India occurred on March 14, just prior to the Lok Sabha elections, following a prolonged period of price freezes that commenced on May 22, 2022. This freeze came after two previous cuts in excise duty, which collectively reduced petrol and diesel excise by Rs.13 and Rs.16 per litre, respectively.