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India hikes windfall tax on petrol, cuts diesel levy
The government increased the tax on petrol exports fivefold while almost halving the levy on diesel shipments as it adjusted its windfall tax regime to changes in refining margins
India has raised its windfall tax on petrol exports while sharply reducing the levy on diesel shipments, making another fortnightly adjustment to a system reintroduced this year after turmoil in global energy markets.
The export duty on petrol rose to ₹2.50 a liter, or about $0.026, from ₹0.50 a liter, effective Friday, 16 October. The levy on diesel exports was cut to ₹8.50 a liter from ₹16.
The tax on aviation turbine fuel exports was unchanged, and the latest orders do not change excise duties on petrol or diesel sold in the domestic market.
The contrasting moves reflect differences in margins for gasoline and middle distillates rather than a broad change in India’s fuel-tax policy. New Delhi reviews the export levies roughly every two weeks, taking account of international crude prices and the profits refiners can earn from selling petroleum products overseas.
The government had cut the diesel export levy to ₹16 a liter from ₹20 from 1 October. Petrol exports were then taxed at ₹0.50 a liter.
India initially imposed windfall taxes on petroleum exports in July 2022 after Russia’s invasion of Ukraine sent global fuel prices higher and produced unusually large refining margins. The measures were subsequently withdrawn before being brought back in March 2026 when crude prices surged during the US-Israeli war with Iran.
The mechanism matters particularly to export-oriented private refiners, including Reliance Industries Ltd and Nayara Energy, because India is a major supplier of refined fuels to international markets.
A lower diesel levy improves the economics of exporting a product that remains important to European and Asian buyers. The petrol increase works in the opposite direction but remains much smaller in absolute terms than the diesel tax.
The government is changing the amount of extraordinary refining profit it seeks to capture from individual fuels as product margins move independently.
Crude prices, shipping costs and regional product shortages have all moved sharply as conflict in the Middle East disrupted normal trading patterns.
The tax structure gives New Delhi a way to respond without changing domestic pump prices every time global refining margins swing, analysts said, adding that for refiners, however, the frequent revisions introduce another variable into decisions over whether a barrel is more profitable in India or overseas.
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