New Delhi slashes export duties on diesel, petrol and jet fuel in the deepest single easing of its 2026 fuel levy cycle, signalling that the supply emergency triggered by the West Asia crisis has passed its peak
NEW DELHI, September 17, 2026. India has cut the export levy on diesel by five rupees a litre and scrapped the road cess on diesel shipments altogether, in a package notified late on Wednesday that also reduced duties on petrol and aviation turbine fuel and delivered the largest combined easing of the country’s fuel export tax regime since the levy was reimposed in March.
The Ministry of Finance, acting through the Department of Revenue, issued the central excise notifications on the evening of September 16 with effect from the same day. The revision takes the total levy on diesel exports to 20 rupees a litre, down from 25 rupees. Petrol falls to 0.50 rupees a litre from 1.50 rupees. Aviation turbine fuel drops to 15 rupees a litre from 19 rupees.
The structural detail matters more than the headline numbers. Of the previous 25 rupee diesel charge, 24 rupees was Special Additional Excise Duty and one rupee was Road and Infrastructure Cess. Under the revision, the Special Additional Excise Duty falls to 20 rupees and the Road and Infrastructure Cess has been brought to nil. The cess on diesel exports had been introduced only a fortnight earlier, on September 1, having previously stood at zero. Its withdrawal two weeks after imposition is the clearest signal Delhi has sent all quarter that it now judges domestic fuel availability to be comfortable.
There is no change to excise rates on petrol and diesel cleared for domestic consumption.
A fortnightly dial that has swung violently
India’s fuel export levy is not a fixed tax but a dial, turned every two weeks in response to international crude and product prices. The mechanism was reintroduced with effect from March 27, 2026, through a set of central excise notifications dated March 26, as part of the government’s response to the crisis in West Asia and the disruption of flows through the Strait of Hormuz. The stated purpose, in the standard formulation used by the Press Information Bureau, is to ensure domestic availability of petroleum products by disincentivising exports.
The same March package carried a ten rupee a litre cut in domestic excise duty on petrol and diesel, the first material domestic reduction since April 2022, designed to relieve state oil marketing companies that were unable to pass higher crude costs through to pump prices.
Wednesday’s revision was the twelfth adjustment since March. The trajectory has been anything but smooth. Official figures published by the Petroleum Planning and Analysis Cell show the diesel levy opening at 21.50 rupees a litre on March 27, exploding to 55.50 rupees on April 11 as Hormuz disruption peaked, then falling back through May, June and July to a low of 8.50 rupees on July 1, before climbing again to 25.50 rupees in early August as product cracks surged. Jet fuel followed a similar arc, peaking at 42 rupees a litre on April 11.
Measured against that April high, the diesel levy is now down roughly 64 per cent.
One important distinction separates the 2026 regime from the windfall tax India operated between July 2022 and December 2024. The earlier version taxed domestic crude production as well as refined product exports, capturing upstream producers including Oil and Natural Gas Corporation and Oil India. The Special Additional Excise Duty on domestic crude went to nil in September 2024 and has not returned. The 2026 framework is an export levy only. Upstream producers are outside it.
The exemption that shapes the whole market
The single most consequential feature of the levy is what it does not touch. Special Economic Zone refineries are outside its scope, a position the government confirmed on the record earlier this year.
“As per judicial pronouncements on this issue, the special additional excise duty and additional excise duty are not applicable on SEZ refineries,” Jainendra Singh Kandhari, Joint Secretary in the Tax Research Unit of the Department of Revenue, told reporters at a briefing in April, in comments carried by Press Trust of India.
The practical effect is large. Reliance Industries operates two refineries at Jamnagar in Gujarat: a 33 million tonne a year unit serving the domestic market, and a 35.2 million tonne a year export-only complex inside a Special Economic Zone. The second is beyond the reach of the levy.
Citi Research, in a note circulated after the March reimposition and reported by Press Trust of India, put the scale of the carve-out in sharp terms. In the 2025 financial year, the bank calculated, 75 per cent of Reliance’s diesel production and 35 per cent of its jet fuel production came from the SEZ refinery. Citi estimated the export taxes at the March rates were equivalent to roughly 36 dollars a barrel on diesel and 50 dollars a barrel on jet fuel.
“If we therefore assume the export tax is applicable only on the non-SEZ volumes, the impact should be largely offset by still-elevated diesel and jet fuel cracks versus pre-conflict levels,” Citi wrote.
Jefferies framed the levy’s function differently, describing it as a ceiling rather than a tax. The reimposed duty, the broker said in a separate note reported by the same wire, “broadly caps diesel and ATF spreads at 20 dollars per barrel for standalone refiners like Reliance,” mirroring the design of the 2022 measure. It added a caveat: “this time the movement in crude premiums and freight rates has been very stiff, making capturing spreads challenging for global refiners.”
The distributional consequence is that the levy falls hardest on exporters without an SEZ shield. That means the state oil marketing companies, Nayara Energy’s 400,000 barrel a day Vadinar refinery, and Reliance’s own domestic-facing unit.
Record margins are the backdrop
The cut arrives into one of the most extreme refining margin environments on record.
Asian ten parts per million diesel refining margins reached an all-time high of slightly more than 87 dollars a barrel on Wednesday September 16, according to LSEG data. That compares with roughly 22 dollars a barrel before the conflict and beats the previous record of 85.60 dollars set at the end of March. United States diesel crack spreads hit a record 117.97 dollars a barrel the same day, and European gasoil futures traded near all-time peaks.
“Asia is no longer immune to the risk premium,” said Abhisek Kumar, senior oil market analyst at Sparta Commodities, in comments carried by Reuters. “Fears around crude availability and Saudi supply disruption have started lifting Asian diesel.”
Russia has extended its own diesel export ban to the end of October, removing a further source of supply from a market already short.
Reliance’s own published benchmark table for the quarter ended June 2026 shows Singapore gasoil ten parts per million cracks averaging 63 dollars a barrel, up 299 per cent year on year, and jet and kerosene cracks at 62.90 dollars, up 343 per cent. Dated Brent averaged 104.50 dollars a barrel over the quarter, a rise of 36.70 dollars, which the company attributed to the closure of the Strait of Hormuz and the disruption of an estimated 13 million barrels a day of crude supply. The company listed the reintroduction of the export levy among its named margin headwinds for the quarter, alongside high crude premiums and higher freight and insurance costs.
Crude retreats, and the emergency eases
The immediate trigger for a cut of this size appears to be a sharp reversal in crude.
Brent settled at 108.75 dollars a barrel on Tuesday September 15, up 2.9 per cent, after Houthi strikes on Saudi Arabia forced the East-West pipeline offline and suspended loadings at Yanbu. By Wednesday it had fallen 2.82 per cent to close near 105.71 dollars, the sharpest single-day drop since late August, as Saudi engineers indicated they could restore between two and 2.5 million barrels a day within days. West Texas Intermediate fell 3.2 per cent to 102.43 dollars. On Thursday Brent slipped further, trading near 103 dollars.
Riyadh has also begun offering additional crude to Asian refiners through ship-to-ship transfers off Sohar in Oman, an improvised workaround that has helped ease the physical squeeze.
If the arc of the levy tracks the arc of the crisis, Wednesday’s notification reads as an official judgement that the worst is behind.
A counterintuitive twist in Russian crude
One assumption that no longer holds is that Indian refiners are enjoying cheap Russian barrels.
The discount on Urals crude delivered to India has not merely narrowed. It has inverted. Reuters assessments show the differential moving from roughly ten dollars a barrel below dated Brent for February cargoes, to one or two dollars below by late July, to a premium of up to one dollar in late August, to a premium of around eight dollars a barrel by September 15 and 16, the highest since May. Outright Urals loading at Primorsk and Novorossiysk was assessed at about 110 dollars a barrel on Tuesday, the highest since April.
Vetsa Ramakrishna Gupta, chief financial officer of Bharat Petroleum Corporation, had flagged the turn in July. “Now no one is offering any discount for Russian crude,” he told Reuters.
Two forces are behind it: Ukrainian drone strikes constraining Black Sea loadings, and Chinese competition for the same barrels. A third is more subtle. With Middle East chokepoints under threat, Baltic and Black Sea crude has acquired a security premium of its own.
“With multiple chokepoints facing disruption, Russian barrels routed through the Black Sea and Baltic become more valuable from a supply-security perspective,” said Sumit Ritolia, lead India analyst at Kpler, in comments to Business Today.
Indian buying has fallen accordingly. Kpler data shows Russian crude arrivals at 2.82 million barrels a day in July, a record and 55.9 per cent of India’s imports, dropping to 2.08 million barrels a day in August and to roughly 1.42 million barrels a day over the first fortnight of September.
“We expect India’s Russian crude imports to soften in September compared with August, primarily due to tighter availability of Russian barrels and increased competition from Chinese buyers,” said Nikhil Dubey, lead analyst at Kpler. Iraq is emerging as the main alternative.
Where India’s barrels go, and who lost access
India is the swing supplier of refined product to three continents, and the geography of its exports has been rewritten twice in eighteen months.
Petroleum Planning and Analysis Cell data show total refined product exports of 5.45 million tonnes in July 2026, the highest monthly volume since September 2025, up 8.5 per cent year on year and 42.2 per cent on June. Diesel exports alone reached 2.44 million tonnes, up 82.1 per cent month on month. Gasoline and diesel together accounted for 68.3 per cent of the export basket. Clean product exports ran at 1.37 million barrels a day in July on Kpler’s count.
By value, the oil ministry reported petroleum product exports of 12.7 billion dollars on 11.3 million tonnes in the April to June quarter, against 9.1 billion dollars on 15 million tonnes a year earlier. Volume down, value sharply up. Petroleum products account for roughly a tenth of India’s gross merchandise exports.
The disruption came from Brussels. Article 3ma of the European Union’s Russia sanctions regulation, inserted by the eighteenth sanctions package adopted in July 2025, banned the import into the bloc of refined products made in third countries from Russian crude. It took effect on January 21, 2026, with Commission guidance requiring enhanced due diligence specifically on shipments from Turkey, India and China.
Vortexa tracking data compiled by OPIS shows the effect. Indian diesel flows into the European Union from Jamnagar ran at 1.02 million tonnes a month in October 2025, fell to 194,000 tonnes in January, then stopped entirely for six weeks between January 21 and February 24. The first post-ban cargo, the long range two tanker Proteus Bohemia, carried 105,000 tonnes from Jamnagar to Rotterdam on February 24.
Trade diversion followed immediately. South East Asia took 49.9 per cent of all Indian diesel exports in March, the highest share since October 2018, according to S&P Global Commodity Insights analysis of Kpler data. Shipments to West Africa collapsed from 580,000 tonnes in January to 183,000 tonnes in February to zero in March. Russian diesel filled the West African gap at 480,000 tonnes in February.
Flows to Europe have since recovered. Indian diesel, jet and gasoline into Europe reached 229,000 barrels a day in July, the highest since November 2025. Jet fuel recovered fastest, running at roughly 62,000 barrels a day by mid-June into Italian ports. In 2025 India supplied 16 per cent of European Union jet fuel imports.
The United Kingdom followed Brussels four months later, banning imports of Russian-origin products refined in third countries from May 20, 2026, but simultaneously issuing a general trade licence permitting continued imports of diesel and jet fuel.
“From today, and for the first time, we have legislation in place that means that it will be illegal to import Russian goods that have been refined in a third country, including India, Turkey and elsewhere,” Trade Minister Chris Bryant told the House of Commons on the day the ban took effect. He acknowledged the licence in the same statement: “These licences are temporary and targeted. We will review them regularly and repeatedly, and will suspend them as soon as we possibly can.”
Asked how long temporary meant, Bryant gave no date. He also apologised for the handling: “We have handled this clumsily. That is entirely my fault.”
The Washington shadow
The levy cut landed within hours of a development in Washington that could matter far more to Indian refiners than a five rupee adjustment.
The United States House of Representatives passed the Sanctioning Russia and Iran Act by 262 votes to 159 on Wednesday September 16, authorising tariffs of up to 100 per cent on the five largest purchasers of Russian oil and gas. The Senate had passed it 86 to 11 in August. The bill awaits the President’s signature.
India is not named in the statute. An amendment that would have listed China, India, Turkey, Azerbaijan, Hungary, Slovakia, the United Arab Emirates, Singapore, Kazakhstan and Kyrgyzstan as initially eligible was defeated in the Rules Committee by seven votes to three. The tariff list is left entirely to presidential discretion.
India’s Ministry of External Affairs responded on Thursday.
“As stated on several earlier occasions, India remains firmly committed to ensuring energy security for its 1.4 billion people,” the ministry said. “It will continue to do so through diversified sourcing and on the basis of evolving market dynamics.”
The ministry added that the issue had been raised at senior levels with United States counterparts and that “its potential implications for not just the bilateral relationship but also the international energy market have been very clearly articulated by the Indian side.” It said the government would “work closely with Indian trade and industry bodies to deal with the implications of these developments.”
The tension is unresolved. Under the trade understanding reached in February, which removed a 25 per cent penalty tariff on Indian goods, the White House stated that India had committed to stop purchasing Russian oil. Indian officials never confirmed that characterisation. India then imported a record 2.82 million barrels a day of Russian crude in July.
Bilateral negotiations remain stalled on market access. “As soon as the United States is able to give us the preferential rate in comparison to our competition, we will finalise the bilateral trade agreement and announce the final details,” Commerce Minister Piyush Goyal said on September 3. India is benchmarking its treatment against Vietnam and Bangladesh.
What it means for buyers
For European importers, the arithmetic improves. A five rupee cut on diesel lands at a moment when Asian diesel margins are at a record, Russian diesel exports are banned until at least the end of October, and European gasoil futures are near peaks. Indian barrels become more competitive into north west Europe, subject always to the origin documentation regime under Article 3ma.
For South East Asian buyers, who have absorbed the marginal Indian diesel cargo all year, a cheaper Indian barrel competes directly against Chinese and Korean supply in a basin where Chinese refiners have already cut export allocations.
For African and Latin American importers, the case for Indian re-entry strengthens. India vacated West and East Africa almost entirely in the first quarter as cargoes redirected east; Russian product filled the space at prices those markets have been paying up for. A lower levy changes the netback calculation.
Fiscally, the cut narrows the revenue offset to March’s domestic excise reduction. The bite is smaller than headline export volumes suggest, given that the Special Economic Zone carve-out removes roughly three quarters of Reliance’s diesel from the taxable base.
The policy read is straightforward, and so is the risk attached to it. Removing a cess a fortnight after introducing it, cutting the diesel levy by a fifth and the petrol levy by two thirds in a single notification, amounts to an official verdict that the emergency is receding. It is a verdict the government has reversed before. In two weeks in April, the diesel levy went from 21.50 rupees to 55.50 rupees. Exporters pricing October cargoes would be unwise to treat Wednesday’s rates as settled.