How Different Crude Price Levels Will Shape India's Fate Amid Excise Duty Cut

The Middle East War has invited attacks on key oil refineries in the region. And, this, coupled with the blockade in the Strait of Hormuz have sent crude prices beyond the roof. India, being a net oil importer, has started to face the heat. The government has announced to slash excise duty by Rs 10 a litre on both petrol and diesel. The move is aimed at comforting the oil companies and keeping citizens away from the heat of inflated prices. 

Excise Duty on Retail Fuel

The overall excise duty on petrol will be reduced from Rs 21.90 to Rs 11.90, and that on diesel will be slashed from Rs 17.80 to Rs 7.80, according to the data available at the Petroleum Planning & Analysis Cell. 

Crude Oil Prices Shoot Up

The average price of an Indian basket of crude oil has surged nearly 80 per cent in only one month. The average price of an oil barrel was $69.01 in February 2026, which rose to $123.15 in March 2026 so far. The price on March 24 was $147.24. 

While the government has slashed the excise duty, it has also imposed windfall taxes on the other hand. 

"Duties have been imposed on exports of diesel at Rs 21.5 per litre and on ATF at Rs 29.5 per litre. This will ensure adequate availability of these products for domestic consumption," Finance Minister Nirmala Sitharaman said on X.

In view of the West Asia crisis, the central excise duty on petrol and diesel for domestic consumption has been reduced by ₹10 per litre each. This will provide protection to consumers from rise in prices. Hon. PM @narendramodi has always ensured that citizens are protected from...

— Nirmala Sitharaman (@nsitharaman) March 27, 2026

The windfall taxes are expected to absorb the financial burden arising from slashing excise duty.

"The cut in excise duty may absorb nearly 30-40 per cent of annualised losses of Oil Manufacturing Companies on auto fuel at current prices, and the annualised fiscal hit to the government would be nearly Rs 1.7 trillion owing to this burden sharing," said Madhavi Arora, Chief Economist, Emkay Global. 

The windfall taxes, though, may cover nearly half of the excise loss, she added.

Scenario Analysis Of Crude At Various Price Levels

The Middle East war is yet to unfold completely. While the blockade in the Strait of Hormuz has massively hurt the global supply chain, Iran has threatened to attack the ships on another major route Bab el-Mandeb. Given that, the analysis of the possible impact on the Indian economy at various crude oil price levels shows that the financial hit in the upcoming financial year is imminent. 

If Brent prices surge to $90 a barrel, which is considered a medium shock, India's current account deficit may surge from 1.3 to 1.9 per cent of GDP, retail inflation may rise from 4.1 per cent to 4.5 per cent, and the Balance of Payment may fall from $15 billion to $63 billion, according to Emkay Research.