India sharply raises petrol export tax, halves duty on diesel

The government raised the export duty on petrol to ₹2.5 per litre from ₹0.5 per litre, a fivefold increase that will boost tax revenues from overseas fuel shipments. Simultaneously, the duty on diesel exports was slashed to ₹8.5 per litre from ₹16 per litre, representing a 47 per cent reduction in the tax burden on diesel producers.

The policy adjustment, which came into force on October 16, reflects the government's effort to balance competing priorities: maintaining fiscal revenues from high-value petrol exports while relieving pressure on domestic diesel supplies and international competitiveness in the diesel sector.

These windfall taxes on fuel exports have been a key revenue-generation tool for the government, enabling it to manage fiscal deficits while moderating domestic fuel prices. The latest revision suggests policymakers are recalibrating the tax structure to respond to current market conditions and domestic energy requirements.

The changes affect India's refining sector, which exports substantial quantities of petroleum products globally. Refiners typically pass increased export duties to overseas buyers, potentially affecting India's competitive position in international fuel markets, particularly in diesel where the reduction may provide some relief.