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India has reduced the special additional excise duty on petrol to Rs 3 per litre and cut it to nil on diesel, according to a government order dated Thursday, which replaces the earlier levy structure with immediate effect, even as global fuel prices remain volatile due to disruptions triggered by the Iran conflict.Based on the latest revision, the duty on petrol has been reduced to Rs 3 per litre from earlier higher levels, while diesel has seen a complete removal of the levy. Previously, the duty stood at Rs 13 per litre on petrol and Rs 10 per litre on diesel, implying a reduction of Rs 10 per litre each, according to prior government notifications. The cuts are effective immediately, according to the Ministry of Finance's notification. Also read: India reimposes windfall tax on diesel, ATF exports; sets rates at Rs 21.5/litre and Rs 29.5/litreThe notification amends the existing excise framework to substitute the duty rates, effectively lowering the tax burden on petrol and eliminating it on diesel, while clarifying that the revised rates will not apply to fuel meant for export.Strait of Hormuz's closure triggers supply chain disruption“Government has taken a huge hit on it taxation revenues to ensure very high losses of oil companies (approximately 24 Rs/litre for petrol and 30 Rs/litre for diesel) at this time of sky high international prices are reduced,” Petroleum and Natural Gas Minister Hardeep Puri wrote on X.CBIC Chairman Vivek Chaturvedi said that the total revenue foregone on petrol and diesel duty slash is Rs 7,000 cr in a fortnight.The duty cuts come as India faces pressure from surging global crude prices and supply disruptions. The U.S.-Israeli war with Iran has led to a near-closure of the Strait of Hormuz, a key conduit for global oil flows, affecting shipping and gas supplies, Reuters reported. India, the world’s third-largest oil importer, meets over 90% of its crude requirements through imports, making it particularly vulnerable to such disruptions.Further, the government has also revised the duty structure on aviation turbine fuel (ATF) through a series of separate notifications. While one notification imposes a special additional excise duty of ₹50 per litre, others provide exemptions or adjusted rates under different provisions. ANI reported that the government has also exempted ATF from certain components of the levy, providing relief to the aviation sector.Also read: India mandates export tax on refineries selling petrol and diesel overseasThe changes form part of a broader set of amendments to the central excise regime notified on March 26, 2026, and follow the previous revision carried out in April 2025, when the Centre had raised duties on petrol and diesel by Rs 2 per litre.The move comes amid heightened volatility in domestic fuel pricing, with global crude markets roiled by the war in West Asia and its impact on supply chains. Retail fuel prices in India have remained largely unchanged despite a sharp rise in international oil prices, putting pressure on oil marketing companies.The government intervention also comes a day after India’s largest private fuel retailer Nayara Energy raised petrol prices by ₹5 per litre and diesel by Rs 3 per litre. The increase highlights diverging pricing strategies in the domestic market as input costs rise.International crude oil prices have surged sharply since late February following US and Israeli strikes on Iran, climbing close to $119 per barrel at peak levels before easing to around $100 per barrel. If crude prices rise further, fuel retailers could incur significant losses on petrol and diesel sales.Nayara Energy, majority-owned by Russia’s Rosneft, operates over 7,000 fuel stations across India. Dealers expressed concern over the price hike, warning of potential demand impact and signalling possible protests. Some dealers also indicated that fuel supplies had been curtailed in recent days.Also read: Oil slips marginally, holds above $100 as Donald Trump pauses Iran energy strikes for 10 days. What lies ahead?Global oil volatility persistsOil prices eased in early Friday trade after a volatile week, as US President Donald Trump signalled progress in talks with Iran and announced a temporary pause on strikes targeting energy infrastructure.Brent crude fell to around $107 per barrel, while US West Texas Intermediate dropped to about $93.6, trimming gains from the previous session when prices had surged sharply on escalation fears.Despite recent spikes, both benchmarks of the Indian equity markets--the Sensex and Nifty--are heading for weekly declines amid hopes of a diplomatic breakthrough. However, the conflict has significantly disrupted flows through the Strait of Hormuz, intensifying supply concerns.Analysts warn that even if tensions ease, crude prices are likely to remain elevated, with forecasts suggesting a range of $85–$110 per barrel in the near term, and potential spikes toward $150 if disruptions persist.

The Reserve Bank of India will hold its key interest rate unchanged at 5.25% on April 8 and at least until mid-2027, a Reuters poll of economists showed, as benign price pressures give it space to assess the impact from the Middle East conflict. Inflation has stayed below the RBI's medium-term target of 4% for a year ‌and economic ⁠growth remains ⁠strong but the U.S.-Israel war with Iran has blocked a key transport corridor and threatens price stability for the world's third-largest oil importer. Still, all but two of 71 economists in the March 23-26 Reuters poll expected the RBI to keep the repo rate unchanged at 5.25% at its next policy meeting. Most see rates on hold at least until mid-2027, a view largely unchanged from a February survey, ⁠before the ‌war began. "Inflation is already quite benign. So there is some space for oil price shocks to get absorbed into higher inflation without really ⁠rocking the boat of the economy...but the risks are clearly to the upside for the policy rate," said Dhiraj Nim, an economist at ANZ. 'PREMATURE TO CONSIDER RATE INCREASE' Sakshi Gupta, principal economist at HDFC Bank, agreed, adding "it is premature to be considering a rate increase." Most economists said the RBI is unlikely to deviate from the neutral stance it has maintained since June given the uncertainty around how long the conflict will persist. Inflation ‌and growth projections have largely remained unchanged. Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, said given the war, "it is important the RBI also doesn't sound complacent or ⁠dovish in this context and is mindful of the inflation risk." The survey showed inflation averaging 4.3% over the next two fiscal years, broadly unchanged from the February poll. Economic growth was forecast to average around 7.0%. Asked about the biggest risk facing the Indian economy in fiscal 2026-27, a strong majority, 30 of 37, cited a combination of low growth and high inflation.