Diesel, jet fuel export duties hiked; special excise on high-speed diesel goes up

The central government on Saturday raised export levies on domestically-produced diesel and aviation turbine fuel (ATF) while maintaining a zero duty on petrol, effective immediately. With these changes, the export duties on domestically-produced diesel and ATF stands hiked to Rs 55.5 per litre from Rs 21.5 per litre and from Rs 29.5 per litre to Rs 42 per litre, respectively.

Separately, it announced a hike in certain levies on high-speed diesel, effective immediately. With this move, special additional excise duty on high-speed diesel now stands at Rs 24 per litre.

It also increased a road and infrastructure cess (RIC) on high-speed diesel to Rs 36 per litre.

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The move is set to rationalise excise duty structure on petroleum products while supporting infrastructure funding through increased cess. These taxes are central government levies that enable the exchequer generate revenue while influencing price-and-supply dynamics.

What is export duty? What does it let authorities achieve?

Export duty is a tax that authorities impose on locally-made products leaving the country. Its sole purpose is to earn revenue from such exports while ensuring adequate domestic supplies (by making it more expensive for manufacturers to export them).

Typically, export duty is used more selectively, especially when domestic supplies need support to stay stable. It also enables authorities to indirectly control inflation.

These levies enable governments to promote local manufacturing competitiveness by raising costs for foreign buyers. At the same time, it lets them conserve natural resources and reduce trade imbalances.

What is special additional excise duty (SAED)?

It is a special ad valorem tax -- meaning a levy based on the value of a transaction -- on certain specific products manufactured in the country. This duty is over and above the basic excise duty.

Introduced in 2015, SAED serves as a flexible tool that lets the government manage manage fiscal revenue and stabilise retail prices.

The central government reviews this levy from time to time, often monthly or more frequently during periods of market volatility or geopolitical disruptions.

What is road and infra cess (RIC)?

It is a dedicated cess -- or additional tax that is over and above base taxes -- with proceeds directed towards the development of infrastructure in the country, such as roads and highways.

Unlike normal levies, cesses are central levies; they are not shared with states. This is what makes them a highly efficient revenue stream for the Union government.