Bhubaneswar: With the Indian Basket crude oil on April 4 dropping to $69.94/bbl, the Modi govt Monday announced an hike in basic excise duty on petrol and diesel by Rs 2/litre.
Though any increase in basic excise duty would lead to jacking up retail prices of the two fuel commodities – petrol and diesel, the Ministry of Petroleum and Natural Gases has discounted any rise in retail prices of the two fuel oils.
The MoPNG posted a statement on X, which states:
PSU Oil Marketing Companies have informed that there will be no increase in retail prices of #Petrol and #Diesel, subsequent to the increase effected in Excise Duty Rates today.#MoPNG
— Ministry of Petroleum and Natural Gas #MoPNG (@PetroleumMin) April 7, 2025
The statement shows oil PSUs to absorb the hike in basic excise duty effected by the Finance Ministry.
HOW OIL PSUs ABSORB?
The Indian Crude Basket crude (ICBC) oil prices after touching its historic low in the pandemic year (2020-21), when it has dropped to $ 44.82/bbl, the prices took a north chart post pandemic to $93.15/bbl in 2022-23.
In the year 2023-24, the ICBC oil prices has moved south to touch $82.58/bbl. As per the Petroleum Planning and Analysis Cell (PPAC), the ICBC oil prices in 2024-25 had went up to touch $85.4/bbl
Since the start of January 2025, the ICBC oil prices have started moving downward. Though the average price has been around $85.4/bbl, a look at the monthwise prices since last April to this April shows a drop in prices by around17%.
APRIL 2024 | MAY | JUNE | JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER | JANUARY 2025 |
89.44 | 83.62 | 82.55 | 84.15 | 78.27 | 73.69 | 75.12 | 73.02 | 73.34 | 80.20 |
FEBRUARY 2025 | MARCH 2025 | APRIL 2025 |
77.33 | 72.08 | On April - $69.94/bbl |
Though the PPAC predicts the average price of ICBC oil for April 2025 month at $74.31/bbl, a glance at the above data shows the price has dropped by over 16.9% (nearly 17%) between April 2024 and April 2025.
CRUDE OIL PRICES TO DROP FURTHER
When Monday the Modi govt hiked the excise duty by Rs 2/lit, Goldman Sacs has released a report that predicts further drop in crude oil prices extending to year 2026.
According to the Goldman Sacs report, Higher risks of recessions and higher-than-expected OPEC+ production will put downward pressure on crude oil price in 2026.
The Goldman Sachs’s analysts issued a new note dated April 6, where they slashed their 2026 oil price forecasts by $4/bbl to $58 for Brent Crude prices and to $55 for the U.S. benchmark, WTI Crude.
Citing the OPEC+ decision to boost production in May and the tariff barrage that President Trump unleashed, on Friday, Goldman Sachs had cut its crude oil forecasts for 2025. It had predicted Brent Crude at $69/bbl in 2025 and WT I at $66/bbl
On Friday, the bank had also revised down its 2026 Brent crude forecast by 9% to $62 per barrel and its 2026 WTI forecast by 6.3% to $59 per barrel.
On Monday, however, it has revised its forecast by slashing the Brent Crude to $58/bbl, amid recession risks, slowing demand, and more supply from the OPEC+ producers.
WILL GOVT HIKE EXCISE DUTY AGAIN?
A look at the history shows Modi government has hiked the excise duty whenever international oil prices fell.
- Raised excise duty on petrol and diesel on 9 occasions between Nov 2014 and Jan 2016 for windfall gain from plummeting global oil prices.
- In those 15 months, duty on petrol rate was hiked Rs 11.77 per litre and diesel by 13.47 a litre mopping-up Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
- It had cut excise duty by Rs 2 in October 2017,
- In 2016, by Rs 1.50/lit
- In July 2019, raised excise duty by Rs 2 per litre
- Excise duty up by Rs 3/lt in March 2020.
- Between March – May 2020, excise duty was up by Rs 13/lt on petrol, 16/lit on diesel
- In 2021, govt rolled back the Rs 13 and Rs 16 per litre excise duty hike when international oil prices soared.
- Just before general elections, it had cut petrol and diesel prices by Rs 2 a litre each
BOTTOMLINE: The above data shows govt may go for excise hike to mop up more revenue as the crude prices are predicted to move down south in 2025 and 2026. If the excise duty will not be hiked, the retail fuel prices may witness a significant drop.
