The government has reduced the windfall tax applicable on exports of petrol, diesel, and aviation turbine fuel (ATF) in response to significant volatility in global oil markets. The revised tax rates became effective on September 16 and are set to remain in place for two weeks, following the government’s schedule for reviewing export duties based on fluctuations in international crude and fuel prices.

The levy on petrol exports has been lowered to Rs 0.5 per litre from Rs 1.5 per litre, while the export duty on diesel has been cut to Rs 20 per litre, down from Rs 25 per litre. For ATF, the tax has decreased to Rs 15 per litre from Rs 19 per litre. Previously, the Rs 25 per litre diesel export duty included Rs 24 per litre as Special Additional Excise Duty (SAED) and Rs 1 per litre as Road and Infrastructure Cess (RIC). The current revision indicates a reduction of SAED to Rs 20 per litre and the RIC has been eliminated.

Current Global Oil Price Situation

This adjustment coincides with rising concerns surrounding supply disruptions in the Middle East, which have notably influenced global oil prices. Crude prices surged earlier in the week following attacks on Saudi Arabian oil infrastructure, coupled with worries over crude flow interruptions. Tensions involving nations such as Iran, the United States, and Israel, along with the risks associated with the Strait of Hormuz, have further complicated market dynamics.

Despite these tensions, the oil market has observed a decrease in prices. Reports indicated that Brent crude futures had decreased by approximately 1.2 per cent, trading at $104.59 per barrel, while West Texas Intermediate (WTI) crude fell by around 1.1 per cent to $101.29 per barrel. This decline followed indications that Saudi Arabia planned to offer more crude to Asian refiners, alleviating some immediate supply concerns.

The market remains highly responsive to any developments regarding supply in the Middle East, with price movements reflecting ongoing uncertainties regarding oil availability and export capacities.

Government’s Reason for Tax Adjustment

The Indian government conducts fortnightly evaluations of its export levies, aligning them with shifts in international crude prices and refinery profit margins. This most recent tax cut partially reverses the changes made during the last review on September 1, when the export levy on diesel was increased to Rs 25 per litre, with petrol and ATF set at Rs 1.5 per litre and Rs 19 per litre, respectively. Thus, current reductions mean petrol has decreased by Rs 1 per litre, diesel by Rs 5, and ATF by Rs 4.

These export levies were initially implemented on March 27, 2026, during the West Asia crisis, in an effort to discourage exports and guarantee sufficient availability of petroleum products for domestic use. The government believes this system offers flexibility to adjust taxes in line with changes in global petroleum prices.

It is important to clarify that the recent decrease in export tax does not imply a reduction in the taxes imposed on petrol or diesel sold within India. The current excise duties applicable for domestic fuel consumption remain unchanged, hence consumers will not see alterations in retail fuel prices as a result of this tax adjustment.

India is a major exporter of refined petroleum products, with petroleum exports contributing significantly to the country’s overall production and gross exports. In June 2026, these exports accounted for 22.9 per cent of India’s petroleum and oil production and 10.8 per cent of total exports. The trajectory of global oil prices will depend heavily on whether supply disruptions continue or resolve in the Middle East, as developments remain critical in shaping India’s import expenses and government tax decisions.

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