The Government of India has reduced special additional excise duties (SAED) on petrol and diesel in a move aimed at easing the impact of rising global crude oil prices triggered by the ongoing US-Iran conflict.
According to a government notification issued on March 26, 2026, the SAED on petrol (motor spirit) has been reduced to nil, while the duty on high-speed diesel has been set at ₹18.5 per litre.
In a government order on Thursday, the finance ministry reduced the special excise duty on petrol to ₹3 per litre from ₹13 earlier. It also cut the duty on diesel to zero from ₹10.
The notification comes amid supply disruptions due to the ongoing US-Iran war. “…the Central Government, being satisfied that it is necessary in the public interest so to do…,” reads a part of the order.
The changes were notified through amendments to the central excise rules and duty structures, which “shall come into force with immediate effect,” as per the Gazette notification. It is unlikely to have any immediate impact on pump prices.
On aviation turbine fuel (ATF), the order states: “Aviation Turbine Fuel Rs. 50 per Litre” as special additional excise duty, alongside exemptions that cap the effective rate at “Rs. 29.5 per litre” in certain cases.
Revised Duty Structure Explained
Under the updated tax framework:
- Petrol now attracts zero SAED, offering full exemption.
- Diesel is subject to ₹18.5 per litre SAED.
Additionally, the government has revised the additional excise duty (AED):
- Petrol remains fully exempt (nil rate).
- Diesel AED has been capped at ₹3 per litre.
The revised rates have come into effect immediately following amendments to central excise rules, as per the official Gazette notification.
Impact on Fuel Prices
Despite the tax cuts, there may not be an immediate reduction in retail fuel prices at petrol pumps. Experts suggest that the move is primarily intended to stabilise prices and prevent sharp increases rather than bring instant relief at the consumer level.
Aviation Fuel Duty Adjustment
The government has also revised duties on aviation turbine fuel (ATF). The SAED on ATF has been set at ₹50 per litre, with provisions that cap the effective rate at ₹29.5 per litre in certain cases.
Global Context: Oil Supply Disruptions
The decision comes amid heightened tensions in West Asia, where the ongoing US-Iran conflict has disrupted global oil supply chains. A key concern is the Strait of Hormuz, a strategic route through which nearly one-fifth of the world’s oil passes.
Recent military actions and supply constraints have pushed global crude oil prices above $100 per barrel, raising concerns over inflation and energy security worldwide.
Economic Rationale Behind the Move
India, being heavily dependent on imported crude oil, faces increased pressure on its economy during such global disruptions. By reducing excise duties, the Government of India aims to:
- Cushion consumers from sudden price spikes
- Control inflationary pressures
- Maintain economic stability amid global uncertainty
