India hikes windfall tax on diesel, petrol and aviation fuel exports

India has increased windfall taxes on exports of diesel, petrol and aviation turbine fuel (ATF), raising duties across all three fuels as global crude oil markets remain volatile amid the ongoing Iran conflict.

According to a government order issued on Monday and reported by Reuters, the revised export duties took effect immediately and are intended to help ensure adequate domestic fuel supplies while responding to fluctuations in international oil prices.

Export duties revised across transport fuels

The latest revision marks a significant increase in levies on refined petroleum product exports.

The revised duties are:

• Petrol export duty: Increased to Rs 3.5 per litre from Rs 2.5 per litre
• Diesel export duty: Raised to Rs 25.5 per litre from Rs 15.5 per litre through two tax levies
• Aviation turbine fuel (ATF) export duty: Increased to Rs 22 per litre from Rs 14.5 per litre

According to the government order, the higher petrol export duty is aimed at ensuring sufficient domestic availability of the fuel.

Global oil volatility drives policy response

The decision comes as international oil markets continue to experience uncertainty linked to the conflict involving Iran, contributing to fluctuations in crude prices.

Reuters reported that the revised windfall taxes reflect the government's response to continued volatility in global energy markets.

India periodically reviews export duties on refined petroleum products to balance domestic fuel availability with changes in international market conditions.

Windfall taxes remain a policy tool

Windfall taxes are typically adjusted in response to movements in global oil prices and refinery export margins. Higher international prices can increase earnings from fuel exports, prompting periodic revisions to export levies.

The latest changes took effect from Monday, according to the government notification.

Key changes at a glance:

• Effective date: Monday
• Petrol duty: Rs 3.5 per litre
• Diesel duty: Rs 25.5 per litre
• ATF duty: Rs 22 per litre
• Reason cited: Oil price volatility and domestic fuel supply considerations

Impact on fuel exporters

The revised duties will affect exporters of refined petroleum products, including aviation fuel supplied to international markets.

The increase in ATF export duty comes as airlines globally continue to monitor fuel costs, which remain one of the largest components of airline operating expenses. The government order, however, relates specifically to exports of aviation fuel rather than domestic consumption.