Lok Sabha Question No. 45 (UNSTARRED), answered on 2026-01-29
Subject: Rationalisation of Taxes and Duties on Fuels
Ministry: PETROLEUM AND NATURAL GAS
Asked by: Shri Mani A

## 45. SHRI MANI A:

## Rationalisation of Taxes and Duties on Fuels

## पेट Ō ोिलयम और Ůाक ृ ितक गैस मंũी

Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a)  whether  the  Government  is  aware  that  the  petroleum  and  natural  gas  sector  is  seeking rationalisation of taxes and duties on fuels and inputs citing high cumulative tax burden affecting transport costs, manufacturing and household budgets, if so, the details thereof;
- (b) whether the Government proposes to bring petrol and diesel under the Goods and Services Tax  (GST)  regime  to  enable  uniform  taxation  and  input  tax  credit  benefits,  if  so,  the  details thereof;
- (c) whether any measures are under consideration to rationalise taxes on natural gas, LPG and aviation turbine fuel to support cleaner energy transition and industrial competitiveness, if so, the details thereof; and
- (d) the steps being taken to balance revenue considerations with the need to reduce energy costs for consumers and key economic sectors?

## ANSWER

## पेट Ō ोिलयम और Ůाक ृ ितक गैस मंũालय मŐ राǛ मंũी ( ŵी सुरे श गोपी )

## MINISTER OF STATE IN THE MINISTRY OF PETROLEUM AND NATURAL GAS (SHRI SURESH GOPI)

(a) to (d): Prices of petrol and diesel are market determined and Public Sector Oil Marketing Companies (OMCs) take appropriate decision on pricing of petrol and diesel. The final selling prices of petrol and diesel include excise duty fixed by the Central Government and State Value Added Tax (VAT)/Taxes fixed by the respective State Governments.  The prices of petrol and diesel in the States across the country vary due to differing freight rates, VAT/local levies etc.

Central Government uniformly decreased the prices across the country by reducing excise duty in  November  2021  and  May  2022  of  Rs.  13/litre  and  Rs.  16/litre  on  petrol  and  diesel respectively.

Government  have  made  fiscal  interventions  whenever  necessary  to  calibrate  the  tax  structure applicable for petroleum products. In April 2025, excise duty on Petrol and Diesel was increased by Rs. 2 per litre each but this was not passed on to consumers. Currently excise duty is levied at Rs. 21.90 per litre and Rs. 17.80 per litre on petrol and diesel respectively.

PSU  OMCs  have  also  carried  out  an  intra-state  freight  rationalisation.  This  has  benefitted consumers located at remote areas, far from Petroleum Oil & Lubricants (POL) Depots in the form of reduced Petrol and Diesel prices in remote parts within the states. This initiative has also reduced  the  difference  between  the  maximum  and  minimum  retail  prices  of  Petrol  or  Diesel within a state.

The GST Council in its 45th meeting held on 17th September 2021 had considered the inclusion of Petrol/Diesel and other petroleum products under the GST regime but the matter was deferred by the Council.

As far as LPG is concerned, India imports about 60% of its LPG requirement and accordingly prices  of  LPG  in  the  country  are  linked  to  its  prices  in  the  international  market.  While  the average Saudi CP (international benchmark for LPG pricing) rose by 35% (from US$ 385/MT in July 2023 to US$ 522/MT in January 2026), the prices of domestic LPG were reduced by about 22%  (from  Rs.  1103  in  August  2023  to  Rs.  853  in  January  2026).  For  PMUY  consumers, effective price for domestic LPG has been reduced by about 39% (from Rs. 903 in August 2023 to  Rs.  553  in  January  2026).  Currently,  domestic  LPG  attracts  a  GST  rate  of  5%,  one  of  the lowest slabs of GST.

The retail selling price of a 14.2 Kg domestic LPG cylinder is currently Rs. 853 in Delhi. After a targeted  subsidy  of  Rs.  300/cylinder  to  PMUY  consumers,  Government  of  India  is  providing 14.2 Kg LPG cylinders at an effective price of Rs.553 per cylinder (in Delhi). This is available to about 10.43 crore Ujjwala beneficiaries, across the country.

During the period 2020-21 to 2022-23, as the increase in international LPG prices was not fully passed on in retail prices, the Oil Marketing Companies (OMCs) suffered significant losses on domestic  LPG.  To  compensate  the  OMCs  for  these  losses,  Government  paid  a  one-time compensation of Rs. 22,000 crore to OMCs in January 2023.

The  international  prices  of  LPG  again  went  up  during  2024-25  and  continue  to  remain  high. However, to insulate  consumers  from  fluctuations  in  international  LPG  prices,  the  increase  in cost  was  not  passed  on  to  consumers  of  domestic  LPG  which  led  to  significant  losses  for the three OMCs. To compensate the OMCs for these losses, Government has recently approved a compensation of Rs. 30,000 crore to the OMCs.

As far as Aviation Turbine Fuel (ATF) is concerned, its pricesare market-determined with effect from 01.04.2001. The excise duty is levied at 11% on Aviation Turbine Fuel (ATF). However, Excise Duty is 2% in place of 11%, for supply to Scheduled Commuter Airlines (SCA) from the regional connectivity scheme (RCS) airports.

Government is committed towards security, affordability  and accessibility of energy for every citizen. To achieve these objectives Government is promoting usage of alternate fuels like CNG, LNG, Hydrogen, biofuels including ethanol, electric vehicles, etc.

Government notified the National Policy on Biofuels - 2018 which laid out indicative target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030 in the country. Subsequently, Government advanced the target of 20% blending of ethanol in petrol from 2030 to 2025-26.  During the ongoing Ethanol Supply Year (ESY) 2024-25, Public Sector OMCs have achieved  the  average  blending  percentage  of  19.24%.  During  the  month  of  October,  2025, Ethanol blending of 19.97% has been achieved.

To  promote  the  use  of  biofuels,  various  programmes  such  as  Ethanol  Blended  Petrol  (EBP) Programme,  wherein  Oil  Marketing  Companies  (OMCs)  sell  petrol  blended  with  ethanol, Biodiesel blending programme wherein biodiesel is blended with diesel, Sustainable Alternative towards Affordable Transportation (SATAT) initiative wherein Compressed Bio Gas (CBG) is marketed along with Compressed Natural Gas (CNG) have been taken up.

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