Government raises windfall tax on diesel to ₹55.5/litre, ATF to ₹42/litre to secure domestic supply

The government on Saturday increased the windfall tax on export of diesel and aviation turbine fuel (ATF) to ₹55.5 per litre on diesel and ₹42 per litre on ATF , with immediate effect , according to a finance ministry notification.

The latest revision marks a sharp increase from the earlier March 26 rates of ₹21.50 per litre on diesel and ₹29.5 per litre on ATF , reflecting a tighter policy stance amid global crude oil volatility and continuing geopolitical tensions in West Asia.

Officials said the move is aimed at ensuring adequate domestic fuel availability and curbing excessive gains from export arbitrage opportunities , as refiners were increasingly earning higher returns from overseas markets compared to domestic sales.

Industry estimates indicate that India’s diesel exports are widely distributed across global markets, with Europe accounting for about 40%, West Africa 20%, Middle East 15%, South Asia 8%, and Singapore and other trading hubs 12%. In the case of aviation turbine fuel, Asia-Pacific destinations such as Singapore, Hong Kong, and Thailand account for about 48% , followed by the Middle East at 25% and Europe at 15% , with the remainder going to smaller spot markets.

The policy tightening comes amid sustained global energy disruption linked to West Asia tensions, including instability in key routes such as the Strait of Hormuz . International crude prices have recently eased to around $95-$97 per barrel . Despite this volatility, domestic petrol prices in India remain around ₹95–₹106 per litre and diesel around ₹88–₹96 per litre across regions, unchanged for now , with state-run oil firms absorbing global fluctuations.

While the export duty increases impact overseas shipments, domestic retail fuel prices remain unchanged for now , as state-run oil marketing companies continue to absorb global fluctuations. However, analysts note that higher export taxes may indirectly influence domestic fuel economics by reducing refinery margins and altering export incentives , which could affect long-term pricing stability.

In practical terms, the new tax significantly increases export costs. Assuming a diesel base price of ₹80 per litre, the effective export cost rises to ₹135.5 per litre after tax , while ATF priced at ₹90 per litre would rise to around ₹132 per litre , sharply reducing export profitability for refiners.

Despite the increase, petrol exports remain exempt from windfall tax, and the government has not announced any further revision at this stage. Officials said the windfall tax framework remains under periodic review , depending on global crude price movements and geopolitical developments.