Government Saves Consumers Rs 1 Lakh Crore Through Excise Duty Cuts Amid Fuel Price Inflation

Government Defends Latest Fuel Price Hikes Amid Global Oil Price Surge

Finance Minister Nirmala Sitharaman on Monday explained that the government had foregone more than Rs 1 lakh crore annually in tax revenues through excise duty cuts on petrol and diesel to shield consumers from fuel inflation triggered by the West Asia conflict. The move was aimed at mitigating the impact of fuel price hikes on consumers.

Petrol and diesel prices have been hiked by almost Rs 7.5 per litre in four installments since mid-May, as oil marketing companies moved to bridge the gap between cost and retail price that had widened due to a surge in international oil prices. Sitharaman stated that the increases were market-driven revisions by oil marketing companies responding to soaring global crude oil prices.

According to Sitharaman, had the excise duty not been slashed earlier, an increase of Rs 10 would have happened, resulting in a Rs 1 lakh crore hit on the functional budget.

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Comparison of Excise Duty Cuts on Petrol and Diesel

When asked if the RBI's dividend of Rs 2.87 lakh crore aligned with the government's expectations, especially given the current need for support, Sitharaman stated that the calculations follow a very clear formulation. She added that the government trusts the RBI in making its calculations and giving the dividend.

On managing the oil price rise amid global challenges, Sitharaman said the situation will be closely monitored. She emphasized that the increase in prices is not minor and will have to be paid through foreign exchange only, posing challenges for the country.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Managing Oil Price Rise Amid Global Challenges

Addressing textiles and ready-made garment exporters, Sitharaman said that geopolitical fragmentation is reshaping global supply chains, creating uncertainty in trade flows, raw material availability, and shipping costs. She emphasized the need for exporters to learn to navigate the world where the rules of trade are being rewritten in real time.

The minister also highlighted the importance of sustainability in the industry, stating that it is no longer optional. She added that global retailers are embedding sustainability requirements into their sourcing criteria, and buyers want traceability, certified organic or recycled fibres, reduced water consumption, lower carbon footprints, and fair labour practices.

Sustainability Requirements in the Textile Industry

The minister also highlighted the importance of investing in technology, not just to compete on cost, but to compete on capability and standards. She added that artificial intelligence and automation are transforming the global textile industry, with robotic sewing, AI-driven demand forecasting, digital printing, and smart manufacturing reducing the labour cost advantages.