Overview
India on Thursday reduced export duties on two major fuel products while leaving domestic consumption duties unchanged, a government notification showed. The export duty on diesel was lowered to 23 rupees per litre from 55.5 rupees, and the export duty on aviation turbine fuel was cut to 33 rupees from 42 rupees. Export duties on petrol remain at zero. At the same time, duty rates on petrol and diesel for domestic consumption were not altered.
Market context and immediate pressures
The government action arrives as India faces higher oil bills. Crude import prices rose to $120 per barrel earlier this month, a development the notification linked to broader market tensions after the closure of the Strait of Hormuz following the U.S.-Israeli war on Iran. Those elevated import costs have squeezed profit margins for retailers that sell gasoline and gasoil.
Indian refiners and retailers have kept pump prices of gasoline and gasoil unchanged for four years, according to the government statement, a practice intended to shield consumers from swings in global markets. That price stability, however, has come at the expense of narrower margins for sellers as global crude costs climbed.
Aviation measures and cost structure
To temper increases in passenger fares, the government capped the monthly rise in aviation turbine fuel prices for domestic carriers at 25% in April. The statement notes that jet fuel can account for up to 40% of an airline's operating expenses, underscoring the significance of fuel cost controls for the aviation sector.
Impacts across sectors
The export duty cuts alter the relative economics of sending diesel and aviation fuel abroad versus selling domestically, while unchanged domestic duties preserve current price signals at the pump. Sectors directly referenced in the notification include refiners, fuel retailers, and domestic airlines, all of which face the operational implications of higher crude import prices and existing price caps.
Summary takeaways
- Export duty on diesel cut to 23 rupees per litre from 55.5 rupees; export duty on aviation turbine fuel reduced to 33 rupees from 42 rupees.
- Duties on petrol exports remain at zero; domestic petrol and diesel duty rates unchanged.
- Crude import prices reached $120 per barrel earlier this month amid Strait of Hormuz closure after the U.S.-Israeli war on Iran; this has squeezed retailer margins.