India reduces special excise duty on petrol and diesel

India has slashed the special excise duty on 'petrol and diesel' as fuel prices remain volatile, with supplies being?stifled by the Iran war.

The Indian Finance Ministry reduced the special excise tax on petrol from 13 rupees per litre to 3 rupees (US $0.0318) in a government order issued Thursday. The duty on diesel was also reduced to zero rupees from 10 rupees.

The U.S. and Israeli war against Iran?has resulted in a near-closure of Strait of Hormuz. This is a conduit for 40% of crude imports. It has hurt shipping and gas supplies.

The government has not said how much duty reductions will cost it.

Madhavi Arora is an economist at Emkay Global who estimated that the annualised fiscal impact would be "nearly 1,55 trillion rupees." The duty reductions would cover between 30%-40% the annual losses that oil marketing companies suffer on auto fuel, according to Madhavi Arora.

India is suffering from volatile crude oil prices and disruptions in gas and oil supplies. However, unlike China, it has not banned the export of refined fuels.

The Prime Minister Narendra Modi, along with his government, have stated that "adequate arrangements" are in place for the summer sowing season. They also said that coal is available to meet rising electricity demand.

India is the third largest oil importer and consumer in the world. It meets 90% of its oil needs by purchasing from abroad.

Imports accounted for 60% of the country's demand. Around 90% of these imports were from the Middle East. ($1 = 94.1980 Indian Rupees) (Reporting and writing by Chris Thomas, Nikunj Ahri; editing by Muralikumar Aantharaman).

(source: Reuters)