Live Events
Fuel duty cuts, domestic pricing context
Global oil volatility drives policy shifts
as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now!
(You can now subscribe to our
(You can now subscribe to our Economic Times WhatsApp channel
India has reintroduced windfall taxes on fuel exports, setting a levy of Rs 21.5 per litre on diesel and Rs 29.5 per litre on aviation turbine fuel (ATF), according to a government order issued on Thursday.The move marks a reversal of the government’s earlier decision to scrap such taxes, as authorities seek to recalibrate revenue from the energy sector amid heightened volatility in global oil markets.The latest notification specifies that the windfall tax will apply to the export of diesel and ATF, key refined products that account for a significant share of India’s outbound petroleum shipments.India had abolished the windfall tax regime in 2024, removing levies on crude oil production as well as exports of petrol, diesel and aviation turbine fuel. The reimposition indicates a renewed policy shift as global crude prices remain sensitive to geopolitical tensions, particularly in the Middle East.The development comes alongside a broader set of changes to the country’s fuel taxation framework, including revisions to excise duties on petrol and diesel notified separately.The reimposition comes alongside a broader reset in India’s fuel taxation framework. The government has cut the special additional excise duty on petrol to Rs 3 per litre and reduced it to nil on diesel, replacing the earlier levy structure with immediate effect.Previously, the duty stood at Rs 13 per litre on petrol and Rs 10 per litre on diesel, implying a reduction of Rs 10 per litre in both cases, based on earlier government notifications. The revised structure lowers the tax burden on petrol and eliminates it entirely on diesel, while excluding fuel meant for export.The intervention follows recent price hikes by private retailer Nayara Energy, which raised petrol prices by Rs 5 per litre and diesel by Rs 3 per litre, highlighting cost pressures in the sector. Petroleum Minister Hardeep Singh Puri said the government had taken a hit on tax revenues to cushion losses of oil companies amid elevated global prices.The policy changes come against the backdrop of heightened global oil market volatility triggered by the ongoing West Asia conflict. Crude prices surged to nearly $119 per barrel after US and Israeli strikes on Iran before easing to around $100 levels.Oil prices remained volatile through the week, with Brent crude slipping to about $107 per barrel and US West Texas Intermediate to around $93.6 after US President Donald Trump signalled a temporary pause in strikes on Iran’s energy infrastructure.Despite the recent pullback, supply concerns persist due to disruptions in the Strait of Hormuz, a key transit route for global energy trade. Analysts warn that crude prices could remain elevated in the $85–$110 per barrel range in the near term, with potential spikes to $150 if disruptions continue.