UPSC Prelims Practice Questions — Government Slashes Excise Duty on Petrol and Diesel to Shield Consumers and OMCs from Global Oil Shock

Q1. In the context of central taxation of petrol and diesel, the term 'divisible pool' refers to which one of the following?

  • A. The portion of the Centre's tax revenue that is shared with States as per the Finance Commission's recommendations
  • B. The total excise duty collected by the Centre on petrol and diesel in a financial year
  • C. The cess and surcharge revenue retained entirely by the Union Government
  • D. The pool of State VAT collections distributed among consuming States

Q2. Since the decontrol of petrol and diesel pricing, the day-to-day retail prices of these fuels are determined by which one of the following?

  • A. Public Sector Oil Marketing Companies
  • B. Petroleum Planning and Analysis Cell
  • C. Petroleum and Natural Gas Regulatory Board
  • D. The GST Council

Q3. Consider the following statements regarding the decontrol of petrol and diesel pricing in India. Which of the statements given above is/are NOT correct?

  1. Petrol prices were made market-determined with effect from June 2010.
  2. Diesel prices were made market-determined with effect from October 2014.
  3. Decontrol simultaneously extended the Administered Pricing Mechanism to petrol and diesel.
  4. Daily dynamic revision of petrol and diesel prices was introduced from June 2017.
  • A. 3 only
  • B. 1 and 3
  • C. 2 and 4
  • D. 1, 2 and 4

Q4. With reference to the public sector Oil Marketing Companies that absorb under-recoveries on the sale of petrol and diesel, consider the following entities. Which of the above is/are correctly identified as such an Oil Marketing Company?

  1. Indian Oil Corporation Limited
  2. Bharat Petroleum Corporation Limited
  3. Hindustan Petroleum Corporation Limited
  4. Oil and Natural Gas Corporation Limited
  • A. 1, 2 and 3
  • B. 1, 2 and 4
  • C. 2, 3 and 4
  • D. 1, 2, 3 and 4

Q5. Consider the following statements regarding under-recoveries of the public sector Oil Marketing Companies. Which of the statements given above is/are NOT correct?

  1. An under-recovery arises when retail prices are held below the international-linked cost of procurement.
  2. In March 2026 the excise relief was directed to the OMCs to offset under-recoveries rather than passed on as a pump-price cut.
  3. An under-recovery is, by definition, identical to an audited accounting loss in the OMC's books.
  4. Distribution of compensation among the OMCs is handled by the Ministry of Petroleum and Natural Gas.
  • A. 3 only
  • B. 1 and 3
  • C. 2 and 4
  • D. 1 and 4

Q6. The main shipping lanes of the Strait of Hormuz lie predominantly within the territorial waters of which one of the following countries?

  • A. Oman
  • B. Iran
  • C. United Arab Emirates
  • D. Saudi Arabia

Q7. The Strait of Hormuz connects the Persian Gulf to which one of the following water bodies?

  • A. Gulf of Oman
  • B. Red Sea
  • C. Gulf of Aden
  • D. Caspian Sea

Q8. Consider the following statements comparing the tax and cess components of central levies on petrol and diesel. Which of the statements given above is/are correct?

  1. Revenue from the basic excise duty is shareable with States, whereas revenue from cesses and surcharges is retained entirely by the Centre.
  2. As per the 15th Finance Commission, 41% of the divisible pool of central taxes is devolved to the States.
  3. The Agriculture Infrastructure and Development Cess introduced in 2021-22 increased the States' share in the taxation of petrol and diesel.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q9. The central excise duty on petrol and diesel — including reductions such as those of November 2021 and May 2022 — is levied and notified by which one of the following?

  • A. Department of Revenue, Ministry of Finance
  • B. Ministry of Petroleum and Natural Gas
  • C. Petroleum Planning and Analysis Cell
  • D. The GST Council, in every instance

Q10. Under the Constitution, the date from which the Goods and Services Tax shall be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel is to be recommended by which one of the following?

  • A. The GST Council
  • B. The Department of Revenue, Ministry of Finance
  • C. The Finance Commission
  • D. Parliament by a special majority

Q11. Consider the following statements regarding the March 2026 cut in central excise duty on petrol and diesel. Which of the above is/are NOT correct?

  1. The central excise duty was cut by ₹10 per litre on both petrol and diesel.
  2. The benefit of the cut was passed directly to consumers as a reduction in pump prices.
  3. The measure was triggered by a spike of about 75% in the Indian crude basket amid the West Asia conflict.
  4. The cut took effect on 27 March 2026.
  • A. 2 only
  • B. 1 and 2
  • C. 2 and 4
  • D. 1, 2 and 4