India Slashes Diesel Export Tax as Global Fuel Crunch Deepens

India has cut its diesel export tax in half for the next two weeks in response to a global fuel shortage and price spikes, while simultaneously raising the tax on gasoline exports fivefold, according to a report by Oilprice.com. The lower diesel export duty aims to encourage more supply onto the international market, where a diesel shortage and price surges have plagued markets.

Meanwhile, the gasoline export duty hike appears to be designed to discourage the exportation of this fuel. India reviews its export duty policy every two weeks, adjusting it based on domestic and global market conditions, including supply levels and prices. Diesel export duties were initially introduced in March during the height of the Middle East crisis when no supplies were passing through the Strait of Hormuz.

At that time, India reduced taxes on fuel domestically and imposed a levy on fuel exports to protect its fuel supply and consumers. The export levies have been reviewed and adjusted every two weeks since then. For the following two weeks beginning October 16, the excise duties on gasoline and diesel sold within the domestic market remain unchanged, but the duties on exports have been revised.

The gasoline export duty was increased to 2.5 rupees ($0.026) per liter, up from 0.5 rupees ($0.005) in the first half of October. However, the export duty on diesel was reduced from 16 rupees ($0.17) to 8.5 rupees ($0.09) per liter for the next two weeks. India's Oil Minister Hardeep Puri stated last month that the nation would continue exporting diesel to help meet global demand and alleviate the fuel crunch. He noted that India's refining capacity is growing due to years of investments.