Windfall tax on petrol export, diesel and ATF levies cut: Latest revision and why it matters

The central government on Friday hiked export duty on petrol and reduced levy on diesel and aviation turbine ​fuel (ATF) -- or jet fuel. The move followed the first hike in petrol and diesel retail rates in four years. With this revision, the export duty on petrol stands raised to Rs ​3 per litre and that ​on diesel cut to Rs 16.5 per ⁠litre and on jet fuel cut to Rs 16 per litre, according to an official statement.

The duties took effect on Saturday, May 16.

This marks the first imposition of special additional excise duty (SAED) -- also know as windfall tax -- on petrol since the start of the West Asia crisis. Other duty rates on petrol and diesel for domestic consumption were left unchanged.

Here are key things to know about this development:

What is the purpose of export duties on petrol, diesel and ATF?

The central government believes the step is necessary in public interest. Special additional excise duty (SAED) is primarily used to ensure adequate domestic fuel supplies.

These levies enable a government to stabilise domestic retail prices, especially during global crises, and earn additional profits from refiners.

The idea is to discourage exports while ensuring that the domestic market is aptly supplied.

First petrol and diesel rate hike in 4 years

Earlier on Friday, PSU OMCs Indian Oil, Hindustan Petroleum and Bharat Petroleum raised the retail prices of petrol and diesel by Rs 3 per litre.

With that revision, in the national capital, petrol is priced at Rs 97.77 per litre and diesel at Rs 90.67 per litre.

Currently, fuel prices vary in different parts of the country due to differences in certain local taxes.

Delhi and Mumbai CNG rates hiked too

Later that day, CNG prices were also hiked by Rs 2 per kilogram in Delhi, taking the retail rate to Rs 79.09 from Rs 77.09 a kg.

The fuel price revisions come at a time when domestic oil marketing companies (OMCs) are grappling with mounting losses amid elevated global energy benchmarks on account of the ongoing Middle East crisis.

The CNG price revision in the national capital followed a similar move, a hike of Rs 2 per kg, across the Mumbai Metropolitan Region (MMR).

Earlier this week, Petroleum Minister Hardeep Singh Puri said that the last 75 days had been challenging due to West Asia-linked tensions, but India had managed the situation effectively so far.

Noting that OMCs are currently losing nearly Rs 1,000 crore daily owing to global oil volatility and pressure across fuel supply chains, Puri said their quarterly losses had reached around Rs 1 lakh crore. Despite the financial strain, he said, the government had not increased petrol or diesel prices in the last four years, even during periods of geopolitical tension and multiple election cycles.

The oil minister also sought to allay concerns about whether the country was headed into a COVID-like lockdown. He categorically stated that there are no plans to impose a lockdown in the country, putting to rest speculation.

The fuel price revisions come as benchmark oil rates stand about 51 per cent higher since February 28 -- when joint American-Israeli strikes against Tehran killed Iran's supreme leader and triggered Iran's retaliatory attacks against several countries in the region. Although ceasefire was established in April, the Strait of Hormuz -- a maritime region crucial to the energy market -- has remained effectively shut. Normally, the sea route enables the supply of roughly one-fifth of the world's oil and gas.

Last week, Prime Minister Narendra Modi urged citizens to cut fuel consumption, avoid unnecessary spending and adopt measures such as work from home to reduce pressure on forex reserves. His appeal followed the government's repeated requests to the public not to purchase cooking and auto fuels in panic, stating that the situation was under control with ramped up domestic energy production and diversified imports.