India Raises Export Duties on Diesel and ATF Amid Rising Oil Prices

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.

Sharp Hike in Export Duties Announced

Revised Duty Rates on Key Fuels

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.

Immediate Implementation

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”.

Background: Rising Global Prices and Supply Concerns

Impact of West Asia Conflict

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.

Initial Duty Imposition

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.

Why the Government Raised Duties Further

Export Incentives vs Domestic Losses

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 Refiners’ Strategy

Private retailers, facing unprofitable domestic sales, adopted multiple strategies to limit losses:

• Some increased fuel prices marginally by ₹3–5 per litre to discourage customers.
• Others restricted the quantity of fuel sold per customer, particularly diesel.
• Many boosted exports to capitalize on higher global prices and secure windfall gains.

Mounting Losses for Public Sector OMCs

Under-Recoveries on Fuel Sales

According to a statement from the Ministry of Petroleum and Natural Gas dated April 2, state-run OMCs were facing significant under-recoveries:

• ₹24.40 per litre on petrol
• ₹104.99 per litre on diesel

These under-recoveries are calculated based on the difference between domestic selling prices and international benchmark rates.

Financial Strain on Public Retailers

The sustained losses placed considerable financial pressure on public sector companies, prompting the government to intervene through duty adjustments to rebalance the market.

Aviation Turbine Fuel Prices See Volatility

Sharp Initial Price Hike

State-run OMCs had earlier increased ATF prices by over 100% to offset losses. On April 1:

• Prices for domestic airlines surged by 114.55%, from ₹96,638.14 per KL to ₹207,341.22 per KL in Delhi.
• For foreign carriers, prices rose by 107%, from $816.91 per KL to $1,690.81 per KL.

(1 KL equals 1,000 litres)

Partial Rollback to Protect Consumers

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.

Balancing Domestic Supply and Market Stability

Ensuring Availability of Fuel

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.

Controlling Inflationary Pressures

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.

Broader Economic Implications

Impact on Private Refiners

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.

Outlook for Energy Sector

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.

Conclusion

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.