India slaps taxes on fuel exports as Iran war jolts supply

India has announced a series of tax changes including a levy on fuel exports, as the country tries to shield consumers from the impact of a deepening conflict in the Middle East that has upended energy supply. The South Asian nation imposed a 21.5 rupee (23 cents) per liter duty on exports of diesel and 29.5 rupees on jet fuel, Finance Minister Nirmala Sitharaman said in a post on X. “This will ensure adequate availability of these products for domestic consumption,” she said.

Shares of top private refiner Reliance Industries Ltd., a major exporter of fuels, fell 4.6% on Friday. India has also slashed taxes on locally sold gasoline and diesel by 10 rupees per liter each, a reduction intended to help keep prices stable at the pump. As the third-largest oil consumer, India is among the countries most impacted by the war in the Persian Gulf and the closure of the Strait of Hormuz, which connects the region with the wider world.

It has seen acute shortages of liquefied petroleum gas, used for cooking, and of liquefied natural gas. The country raised LPG prices earlier this month and subsequent speculation around a likely increase in pump prices of diesel and gasoline has led to panic buying, with people lining up outside forecourts. The energy crunch comes at a delicate time for a price-sensitive country, with elections in key states where Prime Minister Narendra Modi’s Bharatiya Janata Party is looking to expand its foothold.

[paywall]

Opposition parties have been pressing for more forceful measures to address the fuel crunch. Modi’s senior ministers have presented the latest tax changes as a substantial intervention, arguing the government has opted to shoulder much of the financial burden. Export taxes on these fuels could help the government offset at least 40% of the revenue losses from cuts in local duties, said Arora.

“So far, the oil marketing companies were bearing the economic losses,” she said. “The government has now taken up the baton on keeping consumers insulated.” Diesel and jet fuel together form a significant portion of India’s refined product exports. Last month, India supplied around 500,000 barrels a day of the two products combined, out of the roughly 1.2 million barrels a day of fuels exported, tanker trading data from intelligence firms Vortexa and Kpler showed.

The government will lose 70 billion rupees every fortnight due to the excise duty cut, Vivek Chaturvedi, chairman of the Central Board of Indirect Taxes and Customs, told reporters at the daily government briefing on the situation. However, it expects to collect about 15 billion rupees over the same period from export taxes levied on jet fuel and diesel, he said.

[/paywall]