Data: The Petroleum Sector Contributed to more than ₹ 7.5 Lakh Crores in Tax Revenue to Central & State Governments in 2023-24
The Petroleum Sector is critical not only to the country’s energy needs but also to the revenues of the central & state governments. Data indicates that Excise Duty accounts for 60% of the central tax revenue through petroleum products, while Sales Tax/VAT accounts for 90% of the state government revenue through these products. Overall, in 2023-24, the Petroleum Sector contributed to more than ₹ 7.5 Lakh crores in Tax Revenue to Central & State Governments.
On 7 April 2025, the Government of India raised the Special Additional Excise Duty (SAED) on petrol and diesel by ₹2 per litre, from ₹10 and ₹8, respectively. This has raised the total excise duty on petrol and diesel to ₹34.9 and ₹33.8 respectively.
This policy move, while domestic in nature, cannot be viewed in isolation from global economic currents, particularly the resurgence of protectionist trade policies and increasing international tariffs from the United States of America (USA) under Donald Trump’s second term as U.S. President.
As the U.S. administration ramps up tariffs on imports, particularly targeting Chinese and select European goods, the resulting uncertainty in global trade flows has stirred oil markets and complicated energy pricing strategies for countries like India. Tariffs tend to disrupt supply chains and reduce demand, which can indirectly inflate commodity prices, including crude oil. Given that India imports over 85% of its crude oil requirements, even a modest volatility in international oil prices significantly impacts the country’s fiscal health.
The increase in excise duty is seen as a move by the Indian government to cushion its budget from external economic shocks, particularly amidst global uncertainties. Notably, the hike was implemented without altering retail fuel prices, with oil marketing companies absorbing the additional cost. However, this approach has also drawn criticism, especially from opposition parties, who argue that despite a decline in international crude oil prices, fuel prices in India remain disproportionately high, allegedly benefiting private oil companies. The opposition has labelled this a blatant misuse of public funds, demanding an audit of related government policies by the Comptroller and Auditor General (CAG) and a formal investigation by the Central Bureau of Investigation (CBI).
Against this backdrop of fiscal policy and political contention, this story delves into the trends in excise duty rates and examines how much revenue is generated by the central and state governments through various taxes on petroleum products.
The data for the story is sourced from Dataful’s comprehensive compilation of tax, revenue, and pricing information related to petrol and diesel, sourced from the Petroleum Planning and Analysis Cell (PPAC), official responses to parliamentary questions, and responses to RTI applications.
Between 2010 & 2025, Excise duty on Petrol and Diesel increased by 136% and 613%, respectively.
Revenue to state and central governments from the petroleum sector, including diesel, natural gas, and others, comes from a range of taxes such as Integrated Goods and Services Tax (IGST), Central Goods and Services Tax (CGST), Customs Duty, Central Excise Duty (EC), Central Excise and Service Tax (CESS) on crude oil, Royalty, State VAT, State Sales Tax and others. Among these, excise duty is further broken down into several components, such as Basic Excise Duty (BED), Additional Excise Duty (AED), and Special Additional Excise Duty (SAED), among others.
As per PPAC data, the total Excise Duty on petrol and diesel as on 27 February 2010 stood at ₹14.7 and ₹4.7 per litre, respectively. By 17 January 2015, these increased to ₹17.4 and ₹10.2 per litre. The trend of rising excise duties continued over the years, culminating in the most recent rates of ₹34.9 per litre for petrol and ₹33.8 per litre for diesel. This represents a significant increase of approximately 136% for petrol and a staggering 613% for diesel compared to 2010 levels.
Between 2018 & 2025, Petrol and Diesel Prices increased by an average of 38% and 46%
Alongside the steady rise in fuel-related taxes, the retail prices of petrol and diesel have also witnessed a significant upward trend. According to PPAC data, the price of petrol per litre on 1 January 2018 stood at ₹72.5 in Chennai, ₹69.9 in Delhi, ₹72.7 in Kolkata, and ₹77.8 in Mumbai. By 1 January 2025, these had climbed to ₹100.8, ₹94.7, ₹105, and ₹103.5, respectively — reflecting an average increase of around 38% across the four metropolises. Diesel prices followed a similar trajectory. On 1 January 2018, diesel was priced at ₹62.9 in Chennai, ₹59.7 in Delhi, ₹62.3 in Kolkata, and ₹63.3 in Mumbai. By 1 January 2025, the prices had surged to ₹92.3, ₹87.6, ₹91.8, and ₹90, respectively, registering an average increase of 46%.
Between 2002-03 & 2023-24, revenue contribution from petroleum sector to central and state governments increased by an average of 10% & 12% each year
With the consistent rise in fuel prices, the revenue contribution (without adjusting for inflation) from the petroleum sector to both the central and state governments has grown substantially. In 2002–03, the sector contributed ₹64,592 crores to the central government and ₹32,157 crores to state governments. By 2013–14, these figures had risen significantly, with the central government’s revenue growing by 137% to ₹1,52,901 crores, and state governments saw even a remarkable 374% increase, reaching ₹1,52,460 crores. The upward trend continued in the following decade. By 2023–24, the petroleum sector’s contribution to the central government increased by another 183% to ₹4,32,394 crores, and to state governments by 109%, totalling ₹3,18,762 crores. On average, between 2002–03 and 2023–24, annual revenue from the petroleum sector increased by approximately 10% for the central government and 12% for state governments.
Between 2002-03 & 2023-24, Excise Duty accounted for an average of about 60% of total Central Government revenue
The central government’s revenue from the petroleum sector is derived from a range of taxes, including Excise Duty, Corporate/Income Tax, Cess on Crude Oil, Customs Duty, and others. Among these, Excise Duty consistently accounted for the highest share of revenue each year between 2002–03 and 2023–24. Corporate/Income Tax and Customs Duty alternated between the second and third positions during most years in this period.
When compared in terms of share in total revenue from the petroleum sector, Excise Duty emerged as the dominant contributor, averaging around 60% during the 20-year period. Notably, its share peaked at 82% in 2020–21, the year most affected by the COVID-19 pandemic, when demand fluctuations and tax adjustments influenced revenue. The lowest share of Excise Duty was recorded in 2004–05, at 48%, still making it the single largest contributor that year.
90% of the revenue from Petroleum sector to State Governments is through Sales/Value Added Tax
Similar to central government, the revenue from petroleum sector to the state governments also comes though several types of taxes, such as Sales Tax/Value Added Tax (VAT) on POL Products, Royalty on Crude Oil/Natural Gas, SGST/UTGST, Octroi, Duties Including Electricity, Entry Tax / Others, and Dividend Income. However, not all these taxes are available to all states since it depends on the location of reserves.
Of all the tax types, Sales Tax/VAT dominated the majority of the share each year during the period from 2002-03 to 2023-24. During the entire period, it accounted for an average of approximately 90% share in the total tax revenue from the petroleum sector to the state government, with the highest being 93% in 2008-09 and the lowest being 84% in the year 2011-12.