India reduces fuel taxes amid rumors of potential nationwide lockdown

India, the world’s third-largest crude importer, has implemented measures in response to energy shortages caused by the ongoing conflict in Iran. The government has reduced fuel taxes as part of its efforts to mitigate the impact on consumers.

According to a recent announcement by Petroleum Minister Hardeep Singh Puri, the authorities were faced with a difficult decision between increasing fuel prices or absorbing the financial burden themselves to protect buyers. In response, petrol duties have been lowered from 13 rupees per liter to 3 rupees per liter, while diesel duties will be completely removed.

The move comes as oil prices have surged past $100 per barrel due to Iran’s closure of the Strait of Hormuz following attacks by Israel and the US on February 28. India imports approximately 40% of its crude through this passage, but officials claim there is no shortage, citing sufficient reserves that will cover 74 days.

The government has also addressed rumors of an impending lockdown, stating they are “completely false” and that India remains resilient. However, the impact on pump prices for ordinary consumers remains unclear.

Analysts estimate that oil companies previously selling at a loss will benefit from the tax cuts, with economist Madhavi Arora estimating an annualized fiscal hit of nearly 1.55 trillion rupees ($16.3 billion). The government has also reimposed export taxes on diesel and aviation fuel, increasing them to 21.5 rupees per liter for diesel and 29.5 rupees per liter for aviation fuel.

India exported 14 million metric tonnes of gasoline and 23.6 million tonnes of gasoil between April 2025 and January 2026, primarily through the private company Reliance Industries.

Source: Al Jazeera