India Hikes Export Duties on Aviation Turbine Fuel and Diesel

The Indian government has raised export duties on diesel and aviation turbine fuel (ATF) — the two most commercially significant refined petroleum products in terms of India’s export revenue from the refining sector — in a direct policy intervention aimed at discouraging excessive outbound shipments by refiners and ensuring adequate domestic availability at stable prices. The revised duties, notified officially, reflect the government’s determination to prioritise domestic fuel supply and consumer price protection over refinery export earnings during a period of exceptional global market volatility.

The export duty hike follows a separate directive imposing a cap on refinery gross refining margins, which sought to prevent state-run oil marketing companies from bearing losses on domestically sold petrol and diesel while private refiners — notably Reliance Industries — earned elevated margins by shifting output toward export markets during the crude supply disruption. Together, the margin cap and the export duty hike represent a coordinated policy framework designed to keep Indian refinery output flowing to domestic consumers rather than to export markets, even when international prices offer better returns.

The Refinery Economics Behind the Decision

The policy decision reflects the structural tension at the heart of India’s downstream oil sector during the Hormuz crisis. India’s major private refiner — Reliance’s twin refining complex at Jamnagar, with a combined capacity of 1.36 million barrels per day — is optimised for export markets and has been able to source crude from multiple non-Gulf suppliers including Venezuela, Russia, and now Iran (under the US waiver) to maintain high operating rates. State OMCs including Indian Oil, HPCL, and BPCL, which are mandated to supply domestic consumers at regulated prices, have been struggling with negative marketing margins as crude costs surged. The export duty intervention forces refiners to internalise a portion of the cost of their domestic supply obligations, reducing the incentive to divert output toward export markets.

India’s Weekly EXIM Review Mechanism Activated

The export duty action sits within a broader government posture of active monitoring and intervention in trade flows during the crisis period. The government has activated a weekly review mechanism for export-import flows, involving close coordination between the ministries of commerce, shipping, and petroleum alongside logistics stakeholders. The mechanism tracks cargo movement, freight rates, insurance costs, and vessel availability — all of which have shown significant volatility — and is designed to enable rapid policy responses as conditions evolve. The weekly EXIM review, combined with the 90 per cent port backlog clearance confirmed by Minister Sonowal last week and the ₹100M Bharat Marine Pool now operational for war-risk insurance, represents the operational infrastructure India has assembled to manage the ongoing crisis systematically rather than reactively.