On Monday, April 8, 2025, the Indian government announced the decision to raise the excise duty on petrol and diesel both. It has been decided to increase by Rs 2 per litre each. This is done despite a sharp excise duty on global crude oil prices.

Even though fuel prices will not go up for consumers, the government is aiming to generate revenue, despite the international oil prices being at their lowest in almost four years. Several arguments, judgments, and conclusions have been made due to this announcement. Let’s see what the market reactions are and how they can affect the economy.

Impact on Retail Fuel Prices and Market Reactions

Regardless of the excise duty hike on diesel or petrol, the retail prices will stay the same for the average consumer. This is due to the adjustment of the excise duty increase against the price cuts that were expected from falling international oil prices. As per the statement of the government, there will be no burden on the common man of India. However, this move has shaken the stock market, where shares of major Oil Marketing Companies (OMCs) such as Reliance Industries, Indian Oil, Hindustan Petroleum, and Bharat Petroleum saw falls. This is one of the major concerns.

Falling Crude Oil Prices and Market Overview

International crude oil prices have witnessed a substantial decline, with both Brent and West Texas Intermediate (WTI) crude standards dropping to their lowest levels since April 2021. Brent crude futures have declined by the approximate value of $2.23 (3.4%) to $63.35 per barrel, and WTI futures declined by $2.22 (3.58%) to $59.77. After the completion of a week, both crude measures recorded losses of nearly 11%. This raises concerns about a potential global recession amid emerging trade uncertainties between the United States and China.

Government’s Reasons for the Excise Duty Hike

The government has defended the diesel and petrol price hike India. The authorities debated that it was an important step due to the fall in crude prices. Hardeep Singh Puri, who is the Union Minister for Petroleum and Natural Gas, has said that even if crude prices increase to $65 per barrel, there will be space for price moderation for all the Oil Marketing Companies. This decision by the government of India came after the recent decline in fuel prices before the 2024 Lok Sabha elections, which followed a long period of price freezes.

Congress Criticizes the Excise Duty Hike

The Congress Party has strongly opposed and criticized the excise duty on diesel and petrol. Mallikarjun Kharge is a senior Congress leader and has accused the government of manipulating the circumstances regardless of the significant drop in international crude oil prices. He debated that crude oil prices have dropped by 41% since May 2014, still the government has decided to increase excise obligations rather than pass the savings on to consumers.

Government Ditches Windfall Profit Tax Amid Falling Crude Prices

In some other cases, the government has announced to ditch the windfall profit tax on domestically-produced crude oil and the export of jet fuel (ATF), diesel, and petrol in December 2024. This move is due to the decline in the prices of international crude oil. This provided some kind of relief to oil producers and exporters. This tax was introduced in July 2022 and was particularly part of a global trend to tax energy companies’ inflated profits during periods of high oil prices.

The diesel and petrol price hike India by the Indian government, despite such declining global crude oil prices, echoes its approach to boost up profits. As the retail fuel prices will remain the same, this move has shaken Oil Marketing Companies, Stock Markets, and opposition parties. As international crude prices continue to fluctuate, the government’s forthcoming conclusions on fuel price adjustments and excise duties will probably remain a matter of intense debate.