Amid rising global energy prices and supply disruptions triggered by geopolitical tensions in West Asia, the Indian government has taken a decisive step to safeguard domestic fuel availability.
By significantly increasing export duties on diesel and aviation turbine fuel (ATF), authorities aim to curb excessive exports by private refiners and ensure sufficient supply within the country.
The government has raised export duties on diesel from ₹21.50 to ₹55.50 per litre, while duties on aviation turbine fuel (ATF) have been increased from ₹29.50 to ₹42 per litre. The move primarily targets private refiners who were benefiting from higher international prices by exporting fuel rather than supplying the domestic market.
The Ministry of Finance issued a notification confirming that the revised duties have come into effect immediately. The notification stated that the levies were increased under prevailing circumstances that “render it necessary to take immediate action”.
The decision comes against the backdrop of escalating tensions in West Asia, which have pushed global crude oil prices higher. These developments have made fuel exports more profitable, encouraging private refiners to prioritize overseas markets.
Earlier, on March 27, the government had introduced export duties on diesel and ATF at ₹21.50 per litre and ₹29.50 per litre, respectively. The objective was to ensure domestic availability “in sufficient quantities” amid fears of supply shortages.
With international oil prices surging, exporting fuel became significantly more lucrative than selling it domestically. This created a disparity, as domestic fuel prices remained largely controlled.
State-run oil marketing companies (OMCs) such as Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited—which together account for nearly 90% market share—continued to sell fuel at regulated prices, absorbing heavy losses.
Private retailers, facing unprofitable domestic sales, adopted multiple strategies to limit losses:
According to a statement from the Ministry of Petroleum and Natural Gas dated April 2, state-run OMCs were facing significant under-recoveries:
These under-recoveries are calculated based on the difference between domestic selling prices and international benchmark rates.
The sustained losses placed considerable financial pressure on public sector companies, prompting the government to intervene through duty adjustments to rebalance the market.
State-run OMCs had earlier increased ATF prices by over 100% to offset losses. On April 1:
(1 KL equals 1,000 litres)
Later, authorities moderated the increase with a smaller 8.6% hike for domestic routes to prevent a sharp rise in airfares. As a result, ATF prices in Delhi for airlines such as IndiGo, SpiceJet, and Air India were reduced to ₹1,04,927 per KL.
The primary goal behind raising export duties is to ensure adequate domestic supply of diesel and ATF. By making exports less profitable, the government aims to redirect supply toward the domestic market.
Fuel prices have a direct impact on inflation, transportation costs, and overall economic activity. By stabilizing domestic fuel supply, the government is also attempting to control inflationary pressures amid global uncertainty.
The increased duties are likely to reduce profit margins for private refiners engaged heavily in exports. This may lead to a shift in their supply strategies toward domestic markets.
With global energy markets remaining volatile due to geopolitical tensions, further policy interventions cannot be ruled out. The government may continue to adjust duties and pricing mechanisms based on evolving conditions.
The government’s decision to sharply increase export duties on diesel and ATF reflects its effort to prioritize domestic energy security during a period of global uncertainty. By discouraging excessive exports and ensuring adequate local supply, the move aims to stabilize fuel availability and mitigate inflationary pressures. However, the policy also highlights the ongoing challenge of balancing market forces with public welfare in a volatile global energy environment.