US-Iran war: Diesel, ATF export taxes hiked as crude rises above $85 a barrel

Amid a fresh surge in global crude oil prices triggered by renewed tensions between the United States and Iran, the government has raised windfall taxes on exports of diesel and aviation turbine fuel, while cutting the duty on petrol. The move comes as concerns over oil supply disruptions pushed benchmark crude prices higher and brought fresh attention to India’s exposure to global energy shocks.

According to a government notification, the export duty on diesel has been increased to ₹15.5 per litre from ₹8.5 per litre. At the same time, the levy on aviation turbine fuel has been raised to ₹14.5 per litre from ₹7.5 per litre. At the same time, the export duty on petrol has been reduced to ₹2.5 per litre from ₹4 per litre. The revised rates will come into effect from July 16.

The latest revision comes as Brent crude traded above $85 a barrel on Thursday. In contrast, US West Texas Intermediate crude hovered around $80 a barrel after extending gains for a fourth straight session. According to Reuters, Brent crude rose to around $85.28 a barrel, while WTI crude climbed to about $80.02 a barrel as fears over supply disruptions in the Strait of Hormuz continued to support prices.

The increase in duties follows a sharp jump in global crude oil prices after hostilities between the US and Iran intensified this week. US President Donald Trump reimposed a naval blockade on all Iranian ports, while Iran responded with retaliatory strikes on US infrastructure in the region. The renewed conflict has raised concerns about possible disruptions to global oil supplies.

The Strait of Hormuz remains one of the world’s busiest oil shipping routes, with nearly a fifth of global oil supplies passing through it. Any disruption to traffic through the waterway can quickly push crude prices higher. Against this backdrop, the government’s revised rates have increased the export duty on diesel from Rs 8.5 per litre to Rs 15.5 per litre and on aviation turbine fuel from Rs 7.5 per litre to Rs 14.5 per litre, while reducing the duty on petrol from Rs 4 per litre to Rs 2.5 per litre.

These changes are part of the government’s fortnightly review of windfall taxes, which are linked to international crude oil prices and refining margins. A windfall tax is an additional levy imposed when companies earn unusually high profits because of sharp increases in commodity prices rather than improvements in their business operations.

In India’s case, these taxes are mainly imposed on exports of petroleum products when global crude prices and refining margins rise significantly, and they are reviewed every two weeks in line with movements in international oil prices.

Oil prices matter closely to India because the country imports more than 85% of its crude oil requirement, making it highly sensitive to changes in global prices. A sustained rise in crude oil can increase the import bill, put pressure on the rupee, raise inflation and widen the fiscal deficit. Higher crude prices can also increase the cost of fuel, transportation and several manufactured goods.