New Delhi, March 30 -- With under-recoveries of fuel retailers exceeding last week's cut in special excise duty and the war in West Asia still in escalation mode, pressure on their margins is likely to continue.

By the government's estimates, oil companies are suffering losses of about Rs.24 per litre on petrol and Rs.30 per litre on diesel. So, the Rs.10 each reduction in duty to Rs.3 per litre on petrol and zero on diesel will fill only a part of their loss gap.

For the Centre to even partly cover their losses is unsustainable anyway, given its fiscal limitations. Annualized, the duty cut means an estimated Rs.1.5 trillion of tax revenue forgone. The mop-up from a new export levy on diesel and aviation fuel can't compensate; its aim i...