The Central Government has revised its windfall tax on fuel exports, increasing export duties on diesel and aviation turbine fuel (ATF) while reducing the levy on petrol exports. The updated tax rates came into effect on July 16 as part of the government’s scheduled fortnightly review, reflecting the recent surge in global crude oil prices.
The move comes at a time when geopolitical tensions have pushed international oil prices higher, prompting India to recalibrate its taxation policy on petroleum exports.
Government Revises Windfall Tax on Fuel Exports
As per notifications issued by the Finance Ministry, the export duty on petrol has been reduced from ₹4 per litre to ₹2.50 per litre.
However, the government has increased taxes on other key petroleum products:
- Diesel export duty: Increased from ₹8.50 per litre to ₹15.50 per litre
- Aviation Turbine Fuel (ATF) export duty: Raised from ₹7.50 per litre to ₹14.50 per litre
- Petrol export duty: Reduced from ₹4 per litre to ₹2.50 per litre
These revised rates are applicable from July 16, 2026.
Why Has India Changed the Windfall Tax?
The latest revision follows a sharp rise in global crude oil prices triggered by escalating geopolitical tensions.
Brent crude climbed nearly 2%, reaching a one-month high of $84.73 per barrel after reports that the United States reinstated a naval blockade on Iran, raising concerns about possible disruptions in oil shipments through the Strait of Hormuz.
The Strait of Hormuz is one of the world’s most critical oil transit routes, handling nearly 20% of global crude oil supplies. Any disruption in this region often leads to higher international oil prices.
Global Supply Concerns Continue to Support Oil Prices
Apart from geopolitical developments, several other factors have contributed to the recent rally in crude prices.
Reduced diesel exports from Russia, attacks on oil tankers, and tightening global fuel supplies have strengthened refining margins worldwide. At the same time, concerns over inflation and slowing global economic growth have limited any further sharp increase in oil prices.
These developments have prompted governments, including India, to closely monitor fuel pricing and export policies.
Earlier Fuel Restrictions Introduced in June
Before the latest tax revision, the Centre had taken another major step to manage domestic fuel availability.
On June 11, the government temporarily restricted industrial, commercial, and institutional consumers from purchasing petrol and diesel directly from retail fuel stations.
Instead, these bulk consumers were instructed to procure fuel through dedicated bulk supply channels to ensure uninterrupted availability at retail outlets and prevent stockpiling.
Why Were Bulk Fuel Purchases Restricted?
The government explained that global geopolitical tensions had disrupted petroleum supply chains and shipping logistics.
Officials also observed that many bulk consumers had shifted to retail fuel stations because retail prices were significantly lower than bulk supply prices.
For example:
- Retail diesel price in Delhi: ₹95.20 per litre
- Bulk diesel price: ₹134.50 per litre
This large price difference encouraged commercial buyers to purchase fuel from retail pumps, creating pressure on retail fuel supplies.
Restrictions on Diesel Purchases
Under the temporary order, diesel sales at retail fuel stations were limited to vehicle fuel tanks or Petroleum and Explosives Safety Organisation (PESO)-approved containers.
Additionally, purchases were capped at 200 litres per customer or vehicle per day.
The restrictions were introduced under the Essential Commodities Act, with violations attracting legal penalties. The order was initially valid for up to 90 days, although it could have been extended if necessary.
Government Withdraws Restrictions
After reviewing the domestic supply situation, the Centre lifted the restrictions on June 29, with the relaxation becoming effective from July 1.
The withdrawal allowed commercial and institutional consumers to resume normal fuel procurement practices while ensuring adequate fuel availability across retail outlets.
What the Latest Windfall Tax Means
The government’s latest decision reflects its effort to balance domestic fuel security with changing global energy market conditions.
By increasing export duties on diesel and aviation fuel while lowering the levy on petrol exports, India aims to respond to higher international refining margins and evolving crude oil prices without disrupting domestic fuel supplies.
As geopolitical uncertainties continue to influence global oil markets, further revisions to fuel taxation and export policies may remain possible in the coming months.