What Happened
- The government raised the windfall levy (export duty) on diesel sharply from ₹21.5 per litre to ₹55.5 per litre, effective immediately from April 11, 2026.
- The windfall levy on Aviation Turbine Fuel (ATF) was simultaneously raised from ₹29.5 per litre to ₹42 per litre; the levy on petrol was kept unchanged.
- The revisions were notified through a series of Department of Revenue notifications citing the need for "immediate action" under prevailing global energy circumstances, specifically the West Asia crisis and Strait of Hormuz disruptions.
- The hike is intended to discourage export of refined fuels and ensure domestic availability at a time when India imports approximately 90% of its crude oil requirements.
Static Topic Bridges
Windfall Tax — Concept and India's Experience
A windfall tax is a one-time or periodic levy imposed on industries that earn unexpectedly high profits due to external events rather than their own enterprise or investment. Governments worldwide have used windfall taxes as a fiscal tool to capture excess profits and redistribute them for public benefit. India first introduced a modern windfall tax on crude oil production and refined fuel exports on July 1, 2022, in the wake of the Russia-Ukraine war that pushed global crude prices above $100 per barrel. The tax is structured as a Special Additional Excise Duty (SAED) on crude oil and as a combination of SAED and Additional Excise Duty (or Road and Infrastructure Cess) on diesel and ATF exports.
- India's windfall tax was reviewed and revised fortnightly by the CBIC based on prevailing international crude oil prices.
- The tax directly affected major exporters of refined petroleum products, primarily Reliance Industries (Jamnagar refinery) and Nayara Energy (Vadinar refinery), both of which have large export-oriented refining capacities.
- India's windfall tax was abolished with effect from December 2, 2024, when international crude prices declined below the threshold justifying the levy — but it has been reintroduced in 2026 due to the energy crisis arising from the Strait of Hormuz blockade.
Connection to this news: The April 2026 reinstatement of windfall levies at substantially higher rates reflects the recurrence of the same structural problem — domestic refined product export profitability rising sharply when global crude prices spike, incentivising refiners to export rather than supply the domestic market.
Export Duty as a Trade Policy Tool
Export duties (also called export taxes) are levied by a government on goods leaving the country. Unlike import duties that raise revenue and protect domestic industries from foreign competition, export duties serve different goals: they discourage outbound flow of essential commodities, keep domestic prices lower than global prices, ensure domestic supply, and prevent resource extraction from benefiting only exporters. In India, export duties are imposed under the Customs Act, 1962, and can be modified through executive notifications without parliamentary amendment for specific items.
- India's Constitution places customs duties under the Union List (Entry 83); Parliament authorises the executive to notify specific rates under the Customs Tariff Act, 1975.
- Export duties are relatively rare instruments; India primarily uses them for petroleum products, ores and minerals (iron ore, chromite), and agricultural commodities during supply scarcity.
- The WTO's Agreement on Subsidies and Countervailing Measures (ASCM) does not directly regulate export taxes, giving governments more flexibility compared to import tariffs.
Connection to this news: The diesel and ATF export duty hike is a classic use of export duty as a supply management tool — preventing domestic refiners from arbitraging the difference between domestic and international fuel prices during a period of global supply disruption.
India's Energy Security and Petroleum Sector
India is the world's third-largest crude oil consumer and importer, meeting approximately 87–90% of its crude requirements through imports. The country's petroleum sector is divided between upstream producers (ONGC, Oil India), downstream refiners and marketers (IOC, BPCL, HPCL — public sector OMCs) and private refiner-exporters (Reliance, Nayara Energy). Domestic fuel prices are regulated for public sector OMCs but Reliance and Nayara export at market prices, making them sensitive to global price differentials.
- India's total refining capacity exceeds 250 million metric tonnes per annum (MMTPA), making it the fourth-largest refining nation.
- Reliance's Jamnagar complex is the world's largest single-location refinery, with a capacity of approximately 1.4 million barrels per day.
- The government also hiked the Special Additional Excise Duty on high-speed diesel and the Road and Infrastructure Cess alongside the export duty revision, indicating a comprehensive fiscal revision of petroleum taxation.
Connection to this news: The sharp export duty hike is aimed at retaining refined product supply within India at a time when the Strait of Hormuz blockade has already tightened crude availability; allowing profitable diesel and ATF exports to continue would exacerbate domestic supply shortfalls.
Key Facts & Data
- Diesel windfall levy: raised from ₹21.5/litre to ₹55.5/litre (a 158% increase)
- ATF windfall levy: raised from ₹29.5/litre to ₹42/litre (a 42% increase)
- Petrol windfall levy: unchanged
- India imports ~90% of crude oil requirements; ~50-53% of crude comes from Middle East
- India's total refining capacity: ~250+ MMTPA (world's 4th largest)
- Windfall tax first introduced: July 1, 2022; abolished: December 2, 2024; reimposed: 2026
- Export duties are notified under Customs Act, 1962 / Customs Tariff Act, 1975