India has reduced the windfall tax on exports of diesel and aviation turbine fuel (ATF) effective from May 1, 2026, while keeping excise duty on domestically sold petrol and diesel unchanged. The levy on diesel exports has been lowered to Rs 23 per litre from Rs 55.5 per litre, and the duty on ATF exports has been cut to Rs 33 per litre from the previous Rs 42 per litre.
Key Changes in Export Duties
In a statement, the Finance Ministry also announced that the road and infrastructure cess on diesel exports will be waived for the next fortnight starting May 1. Meanwhile, the export duty on petrol will continue to remain at zero. Earlier, on March 26, the government had imposed export duties of Rs 21.50 per litre on diesel and Rs 29.5 per litre on ATF. These rates were subsequently increased during a review on April 11 to Rs 55.5 per litre for diesel and Rs 42 per litre for ATF.
Reason Behind Windfall Tax
The windfall tax was introduced to ensure adequate domestic supplies of petroleum products remain available amid supply disruptions arising from the conflict involving the United States, Israel and Iran. It was also intended to prevent exporters from profiting excessively from the widening gap between domestic and international fuel prices as global crude markets rallied sharply. According to the ministry, the export duty framework is aimed at discouraging excessive overseas shipments during the ongoing West Asia crisis, thereby safeguarding domestic fuel availability.
Impact of Geopolitical Tensions
Following military strikes by the United States and Israel on Iran on February 28, Tehran responded with extensive retaliation, escalating tensions across the Middle East. India’s oil supply through the Strait of Hormuz remains affected, but its diversified procurement basket and the availability of millions of barrels of Russian crude on water have helped ease the supply bottlenecks for now. Since the outbreak of the conflict, crude oil prices have climbed steeply, rising from around $73 a barrel to a four-year high of $126 a barrel.
The reduction in windfall tax comes as global crude prices have shown some moderation, though the geopolitical situation remains fluid. The government continues to monitor the situation and adjust duties as necessary to balance domestic supply and export competitiveness.
