Petrol and diesel rates will be reviewed every 15 days, the federal government said Friday after it slashed special additional excise duties on both petroleum products by Rs 10 per litre each.
The cuts will bring total central government excise duties on petrol down to Rs 11.9 per litre of petrol and Rs 7.8 per litre of diesel, effective immediately, the Petroleum Ministry had said.
However, the reduction will not affect retail prices, Vivek Chaturvedi, Chairman of the Central Board of Indirect Taxes and Customs, confirmed at a press briefing later in the day.
Chaturvedi confirmed the cut was meant to absorb oil marketing companies' under-recoveries as a result of price shocks and supply disruptions emerging from the US and Israel's war on Iran.
"There is a significant surge in crude prices. There has been a surge for petrol, diesel, and ATF (i.e., aviation turbine fuel, a factor in commercial air fares)," he explained, "The government has a calibrated approach… special additional excise duty (i.e., windfall tax) and cess have been brought (to curb) export of diesel and ATF. Rates will be reviewed every 15 days."
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The war - which began Feb 28 with strikes on Tehran and has expanded to the targeting of energy infrastructure across West Asia - also prompted Iran to mount a blockade over the Strait of Hormuz, through which 20-25 per cent of the world's seaborne crude oil and gas transits.
The war and the blockade sent prices of global benchmark Brent crude skyrocketing from US$68 per barrel on Feb 28 (before the fighting began) to past the US$100 red line on March 7.
As of Friday afternoon (3.40 pm IST) Brent was at US$110 per barrel.
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The Hormuz is a key supply route for India; an estimated 40 to 50 per cent of its crude oil imports, i.e., between 2.2 and 2.8 million barrels per day, historically comes through it.
India also imports large amounts of gas from West Asia; between 16 and 17 per cent of LNG, or liquified natural gas, exported by Qatar and the UAE via Hormuz is purchased by Delhi.
In addition, India also imports - from Qatar, again, and Iran via the Hormuz - large quantities of LPG, or liquified petroleum gas, that is used by over 33 crore households.
This reliance had led to worries about oil and gas shortages.
However, the government has stressed there is no immediate danger.
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On Thursday the government reiterated its position and said India had about 60 days of oil stock cover and 30 days of LPG cylinder supply. Reports of shortages were slammed as a "deliberate misinformation campaign" to trigger panic buying. Industry sources told NDTV the government had fast-tracked the signing of contracts to diversify crude and LPG imports.
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Sujata Sharma, Joint Secretary (Marketing & Oil Refinery), Ministry of Petroleum and Natural Gas, underlined that point today, saying India has "sufficient crude inventories".
"We are still in a war situation. Our crude, LPG and LNG supplies have been affected (but) we have sufficient inventories and have lined up supplies for the next two months," she said.
"The LPG and LNG situation is comfortable… refineries are working at more than 100% capacity and commercial supplies have been restored from over the past few weeks to 70 per cent."
