Centre Scraps Petrol Export Duty, Raises Diesel and Aviation Fuel Levies

NEW DELHI, October 31: The Centre has removed the special additional excise duty of Rs 2.5 per litre on petrol exports while increasing the export levy on diesel and aviation turbine fuel (ATF), introducing fresh changes to India’s petroleum taxation framework.

According to notifications issued by the Ministry of Finance on Saturday, the export duty on high-speed diesel has been increased from Rs 8.5 to Rs 11.5 per litre. The levy on aviation turbine fuel has also been raised from Rs 10.5 to Rs 11 per litre.

The revised rates came into effect on October 31, following their publication in the official Gazette.

The changes represent another adjustment in the government’s approach to regulating petroleum product exports amid fluctuations in international energy prices and concerns over domestic fuel availability.

The decision comes as India’s energy sector continues to navigate uncertainty arising from geopolitical tensions, changing crude oil prices and variations in international demand.

The government has been reviewing export duties on petroleum products at regular intervals to account for changes in global market conditions.
Petrol export duty removed
Under the latest revision, the Centre has completely withdrawn the special additional excise duty of Rs 2.5 per litre previously applicable to petrol exports.

The removal reduces the tax burden on companies exporting petrol and changes the cost structure for refiners and petroleum marketing businesses involved in international trade.

However, the government has simultaneously increased the duty applicable to diesel exports, indicating a differentiated approach towards various petroleum products.

The diesel levy has been raised by Rs 3 per litre, moving from Rs 8.5 to Rs 11.5 per litre.

The duty on aviation turbine fuel has increased by 50 paise per litre, taking the rate to Rs 11.

The changes were notified through separate excise notifications issued by the Department of Revenue.

Notification No. 56/2026-Central Excise specifically covers the increase in the export levy on aviation turbine fuel.

The revised structure will affect the taxation calculations of companies exporting these petroleum products.
Government continues fortnightly review mechanism
The export duties on petrol, diesel and aviation turbine fuel were initially introduced on March 27, 2026, against the backdrop of the West Asia crisis.

At that time, international energy markets were facing significant uncertainty, with rising crude oil prices and concerns about the security of petroleum supplies.

The government had explained that the levies were intended to discourage excessive exports and ensure sufficient availability of petroleum products within the domestic market.

Since their introduction, the duties have undergone several revisions.

The government has been reviewing the rates every fortnight, taking into account average international prices of crude oil, petrol, diesel and aviation turbine fuel during the period following the previous assessment.

The October 31 revision follows the earlier review conducted on October 16.

Before the latest changes, the applicable duties stood at Rs 2.5 per litre on petrol, Rs 8.5 per litre on high-speed diesel and Rs 10.5 per litre on ATF.

The latest notification removes the petrol levy while increasing the other two rates.

This mechanism allows the government to respond to changing international market conditions without maintaining a fixed export duty structure throughout the year.
Implications for oil refiners and exporters
India is a major refining centre with substantial capacity to process crude oil into petroleum products for domestic consumption and international markets.

The country’s refineries supply petrol, diesel, aviation fuel and other products to domestic customers while also serving overseas buyers.

Changes in export duties can influence the economics of these operations by affecting the difference between international selling prices and domestic realisations.

The removal of the petrol export duty could improve the economics of petrol shipments for refiners, depending on prevailing market prices and other applicable costs.

In contrast, the higher diesel levy may reduce the net returns from exports or influence the commercial decisions of companies involved in overseas sales.

The increase in ATF duty could similarly affect exporters supplying aviation fuel to international markets.

The final impact will depend on individual companies’ production costs, contractual arrangements, transportation expenses and the prevailing international price environment.

For refiners operating integrated facilities, decisions regarding product allocation between domestic and overseas markets are influenced by multiple factors.

These include domestic demand, refining margins, export opportunities and regulatory requirements.

The latest changes may therefore prompt companies to reassess their export strategies and product distribution plans.
Aviation sector and fuel market considerations
Aviation turbine fuel is one of the most significant operating expenses for airlines.

Changes in the taxation of ATF exports primarily affect companies involved in international fuel shipments, rather than directly changing domestic airline fuel prices.

However, the wider energy market remains important for aviation businesses because fuel costs influence airline operating expenses, ticket pricing and profitability.

International aviation fuel prices are closely linked to crude oil markets and refining margins.

Geopolitical disruptions, shipping difficulties and supply uncertainty can contribute to fluctuations in fuel prices.

For airlines, maintaining predictable fuel procurement costs is essential for managing operations and planning routes.

The latest increase in the ATF export levy comes amid continuing uncertainty in global energy markets.

While the immediate effect on domestic aviation prices cannot be determined from the export duty revision alone, developments in international fuel markets will remain important for the industry.
West Asia tensions continue to influence energy policy
The changes come against the backdrop of continuing geopolitical uncertainty in West Asia, a region central to global oil and gas supplies.

Any disruption affecting major production facilities, shipping routes or energy transportation networks can influence international petroleum prices.

India imports a substantial portion of its crude oil requirements and remains exposed to changes in global energy markets.

Higher international prices can increase the country’s import expenditure and place pressure on the current account balance.

They can also influence the cost structure of domestic refiners, fuel distributors, transport companies and other energy-intensive industries.

The government must therefore balance the interests of domestic consumers, refiners and exporters while ensuring that petroleum supplies remain adequate.

The export duty mechanism is one of the instruments available to policymakers for managing petroleum product availability and responding to changing international price conditions.

The latest revision suggests that the government continues to prefer periodic adjustments rather than a uniform taxation approach for all petroleum products.
Impact on domestic fuel availability
One of the primary objectives behind introducing petroleum export duties in March was to discourage excessive overseas shipments during a period of supply uncertainty.

The government wanted to ensure that domestic consumers and industries continued to receive adequate supplies.

Petrol and diesel are essential to India’s transportation and logistics networks, while aviation fuel is critical for airlines and airport operations.

Any shortage or sharp increase in domestic fuel prices could affect transportation expenses, industrial activity and household budgets.

The government has therefore maintained close oversight of petroleum exports while monitoring domestic requirements.

The latest changes will need to be assessed in the context of current refinery output, domestic consumption and international demand.

An increase in diesel export duty may encourage refiners to reconsider the relative attractiveness of overseas markets, although actual decisions will depend on commercial conditions.

The removal of the petrol duty, meanwhile, provides exporters with a different cost environment for that particular product.
Broader implications for India’s energy trade
India’s petroleum sector plays an important role in international trade, with domestic refineries supplying products to several overseas markets.

Petroleum product exports contribute to foreign exchange earnings and help maintain high utilisation levels at major refining facilities.

However, export opportunities must be balanced against domestic energy security, particularly during periods of international instability.

The government’s fortnightly review system provides an opportunity to adjust duties as international prices and domestic supply conditions change.

For businesses, frequent revisions create a need for careful monitoring of tax notifications and export-related financial calculations.

Companies involved in petroleum trading must account for changes in duties while negotiating supply contracts and determining shipment schedules.

The revised rates may also influence the competitive position of Indian petroleum products in overseas markets, particularly where exporters compete with suppliers from other major refining economies.
Energy market outlook
The latest duty changes highlight the government’s continuing effort to balance domestic fuel requirements with the commercial interests of India’s refining and export industry.

Removing the petrol levy while increasing duties on diesel and aviation fuel creates a revised tax structure that reflects the separate treatment of different petroleum products.

The next fortnightly review will be important in determining whether the current rates remain unchanged or undergo further adjustments.

International crude oil prices, regional geopolitical developments, refinery output and domestic fuel consumption are likely to remain key considerations.

For refiners and exporters, the immediate priority will be to assess the financial implications of the revised duties and adjust their trading strategies accordingly.

For the wider economy, stable petroleum supplies remain essential to controlling transportation costs, supporting industrial production and maintaining energy security.

The government is expected to continue monitoring developments in international energy markets as it seeks to protect domestic interests while retaining India’s position as a major refining and petroleum-exporting country.

The latest notification therefore represents an important adjustment in India’s petroleum trade policy at a time when energy security and global market volatility remain central economic concerns.