New Delhi: The government increased the price of cooking gas cylinders by Rs 50 and the excise duty on petrol and diesel by Rs 2/litre on Monday while keeping the retail prices unchanged. The decision comes as Oil Marketing Companies (OMCs) are expected to post a cumulative loss of Rs 41,338 crore on Liquefied Petroleum Gas (LPG) in the last financial year 2024-25. The government’s decision effectively means that while oil PSUs will be gaining Rs 50/LPG cylinder at a time when international gas prices are on the higher side, they will also be losing Rs 2 on each litre of petrol and diesel that is retailed.
Addressing a press conference on Monday, Minister for Petroleum and Natural Gas Hardeep Singh Puri said that the excise duty hike will be absorbed by the OMCs and the proceeds will go to the Consolidated Fund of India (CFI), from where the government may then offer financial support to the PSUs to cover the losses incurred on LPG. This effectively means that the government will be taking Rs 2/litre from the pockets of oil PSUs and can use the accruals to compensate them for the losses on LPG later. On being asked if the excise duty hike wouldn’t compound the financial woes of oil PSUs at a time when they have already incurred huge losses, the minister said that the state-run oil companies have enough headroom to absorb the hike and are “in the pink of (financial) health.” “I don’t think OMCs have any difficulty in absorbing the Rs-2 increase in excise duty. Based on our discussions with them, we believe that they will be able to absorb the excise duty hike while holding fuel retail prices steady,” said Puri.
The increase of Rs 50 in the price of LPG cylinders announced by the government will also not offer much reprieve financially to OMCs as it will only cover the losses incurred by them in the future. For the past accumulated loss of around Rs 41,338 crore, OMCs may get budgetary support from the government if it is approved by the Ministry of Finance. In addition, they will be losing Rs 2/litre of petrol and diesel.
The minister said that the government stands committed to compensating the OMCs for the losses and will be making a request to the Ministry of Finance. “It is our commitment to make good their losses,” the minister said. Around 16,000 crore litres of petrol and diesel is consumed annually in the country and the excuse duty hike of Rs 2/litre could yield up to Rs 32,000 crore in revenue to the government.
“The #ExciseDuty increase of Rs 2 per litre on #petrol and #diesel by Central Government will not be passed on to the consumers. On one hand, this will insulate the customers from the price hike while on the other hand, the collected amount may be utilised towards under-recovery of #LPG, providing relief to Oil Marketing Companies,” said Indian Oil in a tweet on Monday.
Commenting on the impact of the excise duty hike, ratings agency ICRA said, “Owing to the significant decline in crude oil prices recently, the marketing margins of oil marketing companies are expected to remain healthy despite the excise duty increase. Crude oil prices have crashed to USD 63-64/barrel (bbl) now from above USD 77/bbl as on March 31, owing to growing fears of a global recession with retaliatory tariffs being announced by China. Additionally, the planned production increase by OPEC+ is also contributing to downward pressure on crude prices. Also, the GoI announced an increase in price of domestic LPG by Rs 50/cylinder with effect from April 8, 2025. The increase in the price of LPG would provide support to the profitability of oil marketing companies who were suffering massive under recoveries on the sale of domestic LPG.”
