India has sharply increased the windfall tax on diesel and aviation turbine fuel (ATF) exports after a surge in global crude oil prices triggered by the escalating tensions between US and Iran.
The windfall tax on diesel exports has been raised to 15.5 rupees per litre from 8.5 rupees, while the levy on ATF exports has nearly doubled to 14.5 rupees per litre from 7.5 rupees per litre.
In contrast, the government reduced the export duty on petrol to 2.5 rupees per litre from 4 rupees. The revised tax rates takes effect from today, July 16th.
Will this slow fuel exports amid strong global demand?
The increase in export taxes could reduce overseas shipments at a time when India’s fuel exports are on track to reach their highest level since September, according to a Bloomberg report.
The move follows high volatility in global crude markets as escalating tensions in the Middle East fuel concerns over energy security. Oil prices jumped higher earlier this week after the confrontation between the United States and Iran intensified, increasing fears that disruptions to regional supplies could affect the global oil market.
Why did India temporarily halt bulk fuel purchases and why were the curbs removed?
The Centre temporarily stopped industrial, commercial and institutional users from buying petrol and diesel at retail fuel stations in June, requiring them to procure fuel through bulk supply channels instead. The measure was introduced to protect fuel availability for the general public, discourage stockpiling and prevent the diversion of supplies during a period of global market uncertainty.
Officials also noticed a sharp rise in purchases at retail pumps as bulk consumers shifted away from dedicated supply arrangements because retail fuel had become significantly cheaper.
At the time, diesel sold at Delhi’s retail outlets cost Rs 95.20 per litre, while bulk buyers paid Rs 134.50 per litre. The wide price difference resulted from state-run oil companies keeping retail prices lower to cushion households from rising global crude prices, while bulk fuel rates continued to reflect market conditions.
To enforce the order, diesel sales at retail stations were limited to vehicle fuel tanks or approved containers, with a daily purchase cap of 200 litres per customer or vehicle. Although the restrictions were initially allowed to remain in place for up to 90 days, the government withdrew them on June 29, and normal sales resumed from July 1.
