New Delhi raises export duties on diesel, petrol and jet fuel for the second time in a month, sparing state-run sales to six small neighbours while more than 100 trading partners absorb the cost of the revived windfall regime
NEW DELHI, August 5, 2026 — India’s Ministry of Finance has raised export levies on the country’s three most important refined fuels, converting a duty that previously stood at nil into a charge of INR 1.5, roughly USD 0.016, per litre on high-speed diesel shipped abroad, and lifting the parallel Special Additional Excise Duty applied to exports of petrol and aviation turbine fuel. The measures, set out in Notification No. 42/2026-Central Excise and companion notifications issued on 3 August 2026, took effect the same day. Records compiled by Global Trade Alert, the Swiss-based monitor of commercial policy, indicate that the changes affect more than 100 trading partners.
The diesel measure operates through the additional excise duty levied on exports of high-speed diesel oil, covering tariff lines under heading 2710 of the harmonised system, including subheadings 2710.12, 2710.19, 2710.20, 2710.91 and 2710.99. Global Trade Alert logged the diesel change alongside two companion interventions covering the increases for motor spirit, known in India as petrol, and for aviation turbine fuel, filing the three measures under intervention numbers 158202, 158203 and 158204. The underlying legal instruments were published by the Central Board of Indirect Taxes and Customs, the arm of the finance ministry that administers excise law.
One carve-out stands between the new duties and a genuinely universal application. Exports of the affected fuels to Bangladesh, Bhutan, the Maldives, Mauritius, Nepal and Sri Lanka are not covered, provided the shipments are made by state-owned oil marketing companies. The exemption preserves a long-standing pattern in Indian energy diplomacy: the country’s public sector refiners and marketers supply much of the transport fuel consumed in the smaller economies of its neighbourhood, several of which lack refining capacity of their own and depend on Indian product flows for basic energy security. By exempting only state-owned channels, the notification keeps that lifeline intact while denying private exporters a back door through regional routing.
A Levy With a History
The August notifications do not create a new instrument so much as tighten an old one. India first imposed windfall levies on fuel exports and on domestically produced crude oil in July 2022, in the turbulent aftermath of Russia’s invasion of Ukraine, when refining margins on diesel and other middle distillates reached levels few in the industry had seen before. The government’s argument at the time was twofold: private refiners were earning extraordinary profits by exporting fuel at elevated world prices while domestic pumps in some regions ran short, and the exchequer deserved a share of gains that owed more to geopolitics than to enterprise. Reuters reporting cited by Forbes India put collections from the levy at around INR 250 billion, about USD 2.6 billion at the then-prevailing exchange rate, in its first partial year of operation in 2022. Collections fell to roughly INR 130 billion in the 2023-24 financial year as global margins normalised, according to the same reporting.
From the outset the regime was designed to be adjusted every fortnight, with rates reset on the basis of average international prices for crude oil, petrol, diesel and jet fuel over the preceding two weeks. That mechanical cadence gave the levy a reputation for unpredictability among traders, who learned to price Indian export cargoes with one eye on the calendar. As margins softened through 2024 the rates were progressively wound down, and in December 2024 the government scrapped the windfall regime altogether, declaring that the extraordinary conditions that justified it had passed.
The March Revival
The reprieve lasted fifteen months. In March 2026, with crude prices surging amid the escalation of hostilities involving the United States, Israel and Iran, the finance ministry reinstated the export levies. According to Indian press reports, the reintroduced duties on 27 March were set at INR 21.5 per litre on diesel and INR 29.5 per litre on aviation turbine fuel, and in April, as the conflict in West Asia deepened, the diesel and jet fuel rates were pushed to INR 55.5 and INR 42 per litre respectively, among the steepest levels seen since the regime began in 2022.
Since that peak the fortnightly resets have moved rates down and then up again with the oil market. Reporting by Business Standard and Republic World indicates that a 16 July revision set the diesel export duty at INR 15.5 per litre and the jet fuel duty at INR 14.5 per litre, while trimming the petrol rate to INR 2.5 per litre. The same outlets reported that the 3 August round lifted the headline rates to INR 3.5 per litre on petrol, INR 25.5 per litre on diesel and INR 22 per litre on aviation turbine fuel, with diesel seeing the sharpest single increase, and framed the move as an effort to curb exports and secure domestic supply amid continued volatility in global crude prices. The Global Trade Alert records verified for this article document the increase in the additional excise duty on diesel from nil to INR 1.5 per litre and the parallel increases in the Special Additional Excise Duty on petrol and jet fuel; the additional excise duty operates as a distinct component of the overall export charge, layered on top of the special duty that moves with the fortnightly cycle.
For traders, the distinction between the components matters less than the direction of travel. Every element of the stack raises the cost of clearing a litre of Indian diesel or jet fuel for export, and every fortnight brings the possibility that the arithmetic of an arbitrage cargo changes before the vessel loads.
Who Pays: The Private Refining Giants
The economic incidence of India’s export levies has always fallen most heavily on two companies. Reliance Industries operates the world’s largest refining complex at Jamnagar in Gujarat, where a dedicated export-oriented refinery of about 700,000 barrels per day sits alongside a second plant serving the domestic market. Nayara Energy, part-owned by Russia’s Rosneft, runs a 400,000 barrel per day refinery at Vadinar on the same stretch of coast. Together the two private refiners account for the overwhelming majority of India’s refined product exports; the state-owned refiners, by contrast, sell most of their output at home and are largely untouched by an export levy.
The scale of the private export machine is considerable. Trade press reporting by Hydrocarbon Processing put Reliance’s fuel exports at 911,000 barrels per day in 2025, roughly 71 percent of India’s total petroleum product exports, with the company’s diesel exports running at three-year highs. Nayara, according to Reuters reporting from mid-2025, exported nearly 3 million tonnes of refined fuel in the first half of that year, about 30 percent of its output, before European Union sanctions imposed on the company in July 2025 forced it to cut runs at Vadinar as shipowners grew wary of carrying its cargoes.
Neither company has published a reaction to the August notifications, and neither did so during earlier rounds of the revived regime; both have historically absorbed the levies as a cost of doing business while adjusting export volumes at the margin. Industry associations representing Indian refiners argued during the 2022-2024 phase of the windfall regime that the levies compressed export margins, complicated long-term supply commitments and discouraged investment in export-oriented capacity, arguments that resurfaced in general form in Indian financial media when the regime returned in March. The finance ministry, for its part, has consistently presented the levies as a temporary, price-linked instrument that ensures domestic fuel availability and captures windfall gains for public purposes, rather than as a permanent feature of trade policy.
The Neighbourhood Carve-Out
The exemption for state-owned sales to the six neighbouring and Indian Ocean economies deserves attention in its own right, because it reveals what the measure is not designed to do. Bangladesh, Nepal, Bhutan, the Maldives, Mauritius and Sri Lanka all rely to varying degrees on Indian refined products, delivered by pipeline, coastal tanker or truck, and in several cases under intergovernmental supply arrangements executed by India’s public oil marketing companies. Nepal, for instance, receives virtually all of its petroleum through Indian Oil Corporation under a decades-old arrangement.
Had the new duties applied to these flows, the cost would have landed on some of the region’s most import-dependent economies and, in practice, on Indian state companies executing government-to-government commitments. The carve-out therefore functions as a foreign policy instrument as much as a fiscal one: it signals that New Delhi’s revenue and supply-security objectives stop at the water’s edge of its immediate sphere of influence. The restriction of the exemption to state-owned exporters also closes an obvious loophole, since private refiners cannot reroute cargoes through Colombo or Port Louis to escape the levy.
Europe’s Complicated Diesel Math
The measure lands in a global diesel market that has spent a year being reshaped by European sanctions policy. The European Union’s eighteenth sanctions package, adopted in July 2025, banned the import of refined petroleum products made from Russian crude oil and arriving from third countries, with exceptions for Canada, Norway, Switzerland, the United Kingdom and the United States. The ban took effect in January 2026 and was aimed squarely at the business model that had made India one of Europe’s largest diesel suppliers: buying discounted Russian crude, refining it on the Gujarat coast and shipping the products west through the Suez Canal or around the Cape.
The anticipation of the ban produced a remarkable surge. India’s diesel exports to Europe jumped 137 percent year on year in August 2025 as buyers stockpiled ahead of the deadline, according to reporting carried by HDFC Sky and OilPrice.com, with total Indian petroleum product flows to Europe reaching nearly 399,000 barrels per day that month. Then came the cliff. Shipping data cited in press reports showed no Indian diesel cargoes arriving in the EU in early January 2026, and Business Standard reported that India’s fuel exports to Europe, previously worth more than USD 10 billion a year and about a fifth of the country’s fuel export volumes, crashed in the following months as the new rules bit alongside the West Asia conflict.
The trade did not disappear; it rearranged itself. Indian refiners redirected diesel toward West Africa, Brazil and other markets outside the reach of the EU rules, while cargoes that could demonstrate non-Russian crude origin retained access to Europe. Reliance, which according to Gulf News and Reuters reporting stopped using Russian crude in its export-oriented refinery at Jamnagar, has continued to serve European buyers from that plant. Business Recorder reported that in July 2026 Reliance shipped 4 to 5 million barrels of diesel to Europe, where inventories had fallen to their lowest levels since 2014, while its exports to Brazil hit an eleven-month high of 2.8 million barrels. For European buyers facing thin stocks, compliant Indian barrels remain one of the few flexible sources of middle distillate supply outside the Atlantic basin.
It is into this tight, documentation-heavy market that the new Indian export duties now insert an additional cost. Every litre of compliant diesel loaded at Jamnagar for Rotterdam or Antwerp carries the levy, and in a market where European diesel cracks have been elevated and volatile, an extra charge at the loading port feeds directly into the delivered price or into the exporter’s margin, depending on who holds pricing power in a given fixture. With European stocks low, sellers are better placed than usual to pass the cost through.
The Fiscal Backdrop
If the supply-security rationale explains the timing of individual fortnightly resets, the fiscal context explains why the windfall regime returned at all. India entered the 2026-27 financial year targeting a fiscal deficit of 4.3 percent of gross domestic product, about INR 16.96 lakh crore in absolute terms, down from 4.4 percent the previous year. That consolidation path was drawn up before the government cut the additional excise duty on petrol and diesel sold domestically by INR 10 per litre to shield consumers from the price effects of the West Asia conflict, a move that analysts cited by Business Standard estimated would cost INR 1 trillion to 1.3 trillion in forgone revenue, roughly 30 basis points of GDP.
The strain is already visible in the accounts. Excise duty collections fell nearly 20 percent year on year to INR 2.12 trillion in April and May 2026, Business Standard reported, and the central government’s fiscal deficit in those two months widened sharply as revenue weakened. The rating agency ICRA warned in June that the deficit could drift toward 4.7 percent of GDP if elevated oil prices persisted, and Reuters reported that officials were weighing austerity measures while insisting the annual target remained within reach. Against that backdrop, a levy that transfers a slice of private refining profits to the exchequer at a moment of high margins is fiscally convenient as well as politically defensible. The windfall regime raised meaningful sums in 2022 when margins were extreme; whether the 2026 edition matches that performance will depend on how long the current price environment lasts and how much export volume the levies themselves deter.
Reaction and Positioning
Formal reactions to the 3 August notifications have been sparse, consistent with the pattern of previous fortnightly revisions, which market participants have come to treat as routine repricing events rather than policy surprises. The finance ministry’s notifications themselves carry no explanatory memorandum beyond the legal text, and the government’s public framing, as reflected in Indian press coverage, emphasises domestic supply security and the volatility of global crude prices.
Within the analytical community, the recurring debate over the regime has resumed in general terms. Critics of export levies have long argued that they blunt the incentive to run refineries at full tilt, push private exporters to divert cargoes to exempt or lower-cost jurisdictions over time, and introduce a political-economy risk premium into investment decisions in Indian downstream capacity. Defenders respond that the levies are transparent, rule-based and self-extinguishing, since the fortnightly formula returns rates to zero when international margins normalise, as it did through 2024. What is genuinely new in 2026 is the interaction with the EU’s Russian-crude product ban, which has already forced Indian exporters into costly rerouting and documentation regimes, and onto which the levy now adds a further layer of friction.
Economic Impact: Margins, Volumes and Arbitrage
The direct fiscal effect of the specific change documented by Global Trade Alert, the move in the additional excise duty on diesel exports from nil to INR 1.5 per litre, is modest per unit: about 1.6 US cents on a litre, or roughly USD 2.5 per barrel. But per-unit modesty understates the commercial significance for high-volume exporters. Applied across export flows on the scale of Reliance’s 2025 diesel programme, charges of this magnitude aggregate into sums large enough to influence run rates, export planning and the split between domestic and export sales. Layered on top of the higher Special Additional Excise Duty rates reported in the Indian press, the total export charge on diesel is now substantial by historical standards, and it arrives at a moment when freight, insurance and compliance costs for Indian product cargoes are already elevated because of sanctions-related complexity.
The predictable microeconomic response is a shift at the margin toward the domestic market, which is precisely the government’s stated intention. Indian domestic diesel demand has been robust, and refiners facing an export levy will find home sales relatively more attractive, easing any tightness at Indian pumps. The corollary is that the world market loses some Indian supply at the margin, at a time when European inventories are thin and the Atlantic basin diesel balance is fragile. Traders will also note the asymmetry embedded in the regime: the levy applies to private exporters serving distant markets but not to state-owned supply of the six exempted neighbours, so regional flows within South Asia and the Indian Ocean should be unaffected.
For Nayara, the levy compounds an already difficult position. Sanctioned by the EU, cut off from much of the Western shipping and insurance market, and reliant on a shrinking pool of buyers led by traders redirecting its products to the United Arab Emirates and West Africa, the company now faces an additional charge on the export volumes it can still place. For Reliance, the calculus is different: its compliant barrels command a premium in a supply-short European market, giving it more room to pass the levy through to buyers.
Implications for Importers and Supply Chains
For European diesel buyers, the practical takeaway is straightforward: one of the largest flexible sources of compliant diesel outside the Atlantic basin has become marginally more expensive, and the fortnightly reset mechanism means the cost could rise further with the next revision. Buyers negotiating term supply from Indian refiners will want price formulas that allocate levy risk explicitly, and cargo-by-cargo purchasers should expect offers to reflect the duty in full while stocks remain low. The deeper lesson of the past year, that Indian export policy and European sanctions policy now interact to shape the diesel market, argues for diversification: Middle Eastern refiners in Saudi Arabia, Kuwait, Oman and the UAE, along with US Gulf Coast suppliers, are the natural alternatives, and all have been adding or debottlenecking capacity.
Airlines and jet fuel procurement desks face a similar, if smaller, exposure through the aviation turbine fuel levy, which raises the cost of Indian jet fuel cargoes into Europe, Africa and Asia-Pacific at a time of firm aviation demand. Gasoline markets are least affected, given the comparatively low petrol rate reported in the press and the smaller weight of petrol in India’s export slate.
For the more than 100 trading partners captured by the measures, the effects will be uneven. Import-dependent economies in East and Southern Africa that have grown reliant on Indian diesel since 2023 will feel the pass-through most directly, since they lack the buying power of European majors. The six exempted neighbours are insulated, but only through state channels: any private Indian sales into those markets remain within the levy’s scope. And for global trading houses, the measures add one more variable to an already crowded matrix of origin rules, sanctions attestations, price caps and freight constraints governing the movement of middle distillates east of Suez.
What Comes Next
The fortnightly review cycle guarantees that the 3 August rates are provisional. If crude and product prices retreat as the West Asia risk premium fades, the formula should walk the duties back down, as it did through 2023 and 2024; if the conflict escalates or European stock-building resumes in earnest ahead of winter, the next resets could push rates higher. The structural questions will outlast any single revision. India has now demonstrated twice in four years that it will reach for export levies when refining margins spike, which means every long-term buyer of Indian products, and every investor in Indian export-oriented refining capacity, must price in the possibility of a third episode. Global Trade Alert’s classification of the measures as affecting more than 100 trading partners captures the breadth of that exposure.
For now, the market’s attention turns to the next notification. In a regime that reprices itself every two weeks, the only certainty is that the arithmetic of shipping a litre of Indian diesel to the world will look different again before the month is out.