India Cuts Windfall Export Duty on Diesel and ATF Effective October 1

India's Finance Ministry issued a notification late Wednesday reducing windfall export taxes on diesel and aviation turbine fuel (ATF), effective October 1. The export duty on diesel was cut to Rs 16 per litre from Rs 20 per litre, while the ATF export levy was reduced to Rs 10.5 per litre from Rs 15 per litre. The export duty on petrol remains unchanged at Rs 0.5 per litre.

These changes follow a prior fortnightly revision on September 16, when the diesel export duty was cut to Rs 20 per litre from Rs 25 per litre and the ATF levy was lowered to Rs 15 per litre from Rs 19 per litre. Petrol export duty was also trimmed at that time, to Rs 0.50 per litre from Rs 1.50 per litre, a rate that has held since.

The latest duty changes coincide with oil marketing companies raising the price of commercial LPG by Rs 62.50 to Rs 2,810 per 19-kg cylinder, while domestic LPG prices in Delhi stayed unchanged at Rs 942 per 14.2-kg cylinder. ATF prices for domestic airlines rose by Rs 16 per litre to Rs 137 per litre. India first introduced windfall taxes on fuel exports in July 2020, withdrew them two years later, and reinstated them in March of this year following a surge in crude oil prices linked to the US-Israeli conflict with Iran. The government reviews export levy rates every fortnight based on international crude oil and petroleum product price movements, with the taxes designed to discourage refiners from prioritising exports over domestic supply.

Per S&P Global Energy Platts data, crude prices more than doubled to approximately $209 per barrel by early April before retreating to $195 a barrel in mid-September. US domestic airfares were 26.5% higher year-on-year as of June, per the US Consumer Price Index, while the Argus US Jet Fuel Index fell from an early April high of $4.99 per gallon to $2.70 per gallon in June.

This is the second consecutive fortnightly reduction in India's windfall levies on diesel and ATF, tracking a retreat in crude benchmarks from their April peak near $209 a barrel toward $195 by mid-September. The mechanism itself is the story: a government recalibrating export incentives every two weeks to keep domestic fuel supply protected without freezing refiners out of export markets entirely.

For refiners, the levy level directly affects the arithmetic of selling diesel and ATF abroad versus into the domestic market, and a falling duty makes export sales relatively more attractive than they were under the September 16 rates. For airlines, the simultaneous Rs 16 per litre rise in domestic ATF pricing to Rs 137 per litre shows that lower export duties do not automatically translate into cheaper jet fuel at home, since domestic pricing follows its own cost pass-through separate from the export levy schedule.

The next fortnightly review will show whether the duty cuts continue in step with crude prices or whether a rebound in international benchmarks reverses the trend. Domestic ATF and LPG pricing, which moved in the opposite direction this round, remains the figure airlines and consumers will watch most closely against any further changes to the export levy.