Centre cuts windfall tax on diesel exports, raises levy on petrol

From 16 October, the Centre changed export taxes differently across fuels. The combined special additional excise duty and road and infrastructure cess on diesel exports fell from ₹16 to ₹8.50 per litre. The special additional excise duty on petrol exports rose from ₹0.50 to ₹2.50 per litre. These rates apply for the fortnight beginning 16 October.

The levy on aviation turbine fuel, or ATF, remained unchanged at ₹10.50 per litre. This means jet-fuel exporters faced no new rate in this revision. The government has been reviewing these export levies every fortnight since introducing them during tensions in West Asia.

The ministry said duties on petrol and diesel cleared for domestic consumption were unchanged. The different export rates show that the government is adjusting taxes by product, partly to manage export incentives and domestic availability while global oil prices remain high.

A windfall tax is a special charge on unusually large gains that arise when market conditions push prices or margins sharply higher. In this case, India applies the charge to selected petroleum exports. It is collected through duties such as the special additional excise duty and road and infrastructure cess.

The policy matters because exporters could benefit from selling fuel abroad when international prices were higher than domestic prices. A higher export levy reduces that advantage. It can therefore discourage exports and help keep petroleum products available inside India. The article says the tax was introduced during the West Asia war for these reasons.

The levy also gives the government a way to capture some value from high-price conditions. Rates are revised every fortnight, allowing changes as oil prices and regional tensions develop. However, the article records the tax rates and aims, not the exact revenue collected from them.

India’s crude-oil imports are much larger in value than its petroleum-product exports. The country imports about $123 billion worth of crude oil annually. It exports petrol, diesel and jet fuel worth about $45 billion. India is therefore a net importer of crude, even while remaining a major exporter of refined fuels.

The difference comes from the stages of the oil business. Crude oil is the unprocessed input. Refineries convert it into usable products such as petrol, diesel and aviation turbine fuel. India can import crude, process it in domestic refineries, and then sell some of those finished products abroad.

The scale is substantial. India has more than 258 million tonnes of crude-refining capacity and is the world’s seventh-largest petroleum-products exporter, according to the petroleum ministry. Reliance Industries leads exports, while state-run oil marketing companies also serve overseas markets.

Changing export taxes alters the price exporters receive after paying the government levy. A higher tax reduces the gain from selling petrol or diesel overseas. A lower tax improves the incentive to export. These changes matter because India is both a major refiner and a country seeking reliable domestic fuel supplies.

For example, the diesel export levy fell from ₹16 to ₹8.50 per litre, making diesel exports less heavily taxed. Petrol’s levy rose from ₹0.50 to ₹2.50, making petrol exports relatively less attractive. The government introduced the windfall tax to discourage exports and prevent companies from exploiting differences between domestic and international prices.

Government revenue per exported litre can rise when a tax increases, but total collections also depend on export volumes. The article does not provide revenue or volume changes after this revision. It does state that domestic petrol and diesel duty rates were unchanged.

Tensions in West Asia can unsettle oil markets because the region is closely linked to global petroleum supplies and trade. The article reports that oil prices rose around 10% in the previous two weeks. Such movements can widen the gap between international prices and prices in India.

When overseas prices rise, exporters may gain more by selling refined fuel internationally. That can reduce supplies available for domestic users or make exports unusually profitable. India introduced export duties on diesel and ATF on 27 March, then extended the levy to petrol from 16 May. The rates have been revised every fortnight since then.

Frequent reviews give the government a way to respond to changing market conditions. For the fortnight beginning 16 October, it cut diesel’s combined levy but raised petrol’s levy. Brent was trading at $105.5 per barrel at about 7:50 AM, despite being down 0.39% from its previous close.

Crude oil is a raw material, not the same product as petrol or diesel. Refineries separate and process crude into fuels and other petroleum products. A country can therefore import crude for processing and still export some of the finished fuels produced by its refineries.

India has more than 258 million tonnes of crude-refining capacity, described in the article as the world’s fourth-largest. Its refineries can turn imported crude into petrol, diesel and aviation turbine fuel. Some of these products are consumed domestically, while others are shipped to overseas markets. Reliance Industries is India’s largest petroleum-product exporter, and state-run oil marketing companies also export.

This explains why India is a net crude importer but the world’s seventh-largest petroleum-products exporter. In fiscal year 2026, domestic petroleum-product consumption reached 243 million tonnes, while exports stood at 61.43 million tonnes. Refining allows both activities to occur at scale.

Crude oil is petroleum in its unprocessed form. Refineries process it into products with different uses, including petrol for vehicles, diesel for transport and aviation turbine fuel for aircraft. These finished products can be sold inside India or exported. The article discusses all three levels of this chain.

Domestic fuel consumption refers to petroleum products used within the country. It is different from production, imports or exports. For example, India may import crude, refine it, consume some petrol and diesel domestically, and export the remaining refined products. The article says domestic consumption reached 243 million tonnes in fiscal year 2026.

Exports are separate from domestic consumption. India exported 61.43 million tonnes of petroleum products in that year. The government’s export levy is aimed at influencing overseas sales and protecting domestic availability, while the ministry said duties on fuel cleared for domestic consumption were unchanged.